Little to Cheer About This Holiday Season - Analyst Blog

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The November retail sales data were released at a moment when the economy is exposed to a mixed bag of events. At one end, the latest report from Labor Department indicated that initial claims for jobless aid has fallen 23,000 to 298,000; on the other hand, consumer sentiment is showing a negative inclination. Again, the unemployment rate declined to a five-year low of 7% in November, but comparable-store sales for the month came below expectation.

Early-hour store openings, huge discounts, promotional activities and free shipping on online purchases were not enough to drive in cautious, budget-constrained consumers to the shop; thus hinting of a tough holiday season for retailers. Consumer confidence appears to have taken a hit as a result of the political impasse in Washington DC. The Conference Board's Consumer Confidence Index fell drastically to 70.4 in Nov 2013, following a sharp dip to 72.4 in October.

As of now, the November sales results have somewhat muted expectations for a strong holiday season performance. According to Thomson Reuters, comparable-store sales edged up 1.9% in November, significantly lower than the projected increase of 2.7%. The International Council of Shopping Centers reveals that comparable-store sales rose 2.1% for the same period.

Data compiled by Swampscott, Massachusetts-based Retail Metrics suggested that comparable-store sales climbed 1.9% instead of 2.9% growth forecast, and decelerated drastically from a 4% increase registered in October.

According to National Retail Federation (NRF), the survey performed by Prosper Insights & Analytics revealed that sales on the Thanksgiving weekend dropped 2.7% to $57.4 billion from $59.1 billion in the year-ago period. This further validates the belief that holiday season has little to cheer about so far and the November comps give a glimpse of a challenging season.

Costco Wholesale Corp. ( COST ) came out with November comparable-store sales results that fell short of analysts' expectations. The company delivered comparable-store sales growth of 2%, portraying an increase of 2% at the U.S. and 1% at international locations.

L Brands, Inc. ( LB ), a specialty retailer of women's intimate and other apparel, beauty and personal care products, disappointed with its comparable-store sales performance that fell 5%. November comps for The Buckle, Inc. ( BKE ), the retailer of casual apparels, footwear and accessories dropped 0.6%, while that of Zumiez, Inc. ( ZUMZ ), specialty retailer of action sports related apparel, footwear and accessories, posted lower-than-expected comps growth of 1.7%.

However, The Gap, Inc. ( GPS ) outperformed analysts' expectation by posting comps growth of 2%, while J. C. Penney Company, Inc. ( JCP ), who has been in troubled waters for quite some time is gradually making a comeback as its comparable-store sales results for the month of November surged 10.1%, despite consumer spending pressure.

Below is the list of comparable-store sales data for some companies.

Companies

November Comparable-Store Sales

Comparable-Store Sales Estimates

The Buckle Inc. (BKE)

-0.6%

-0.5%

Costco Wholesale Corporation (COST)

2.0%

3.3%

Gap Inc. (GPS)

2.0%

0.8%

Stein Mart Inc. (SMRT)

3.1%

2.5%

L Brands, Inc. (LB)

-5.0%

-1.1%

Fred's, Inc. (FRED)

0.0%

1.3%

Zumiez, Inc. (ZUMZ)

1.7%

3.0%

Source: Thomson Reuters

What is further making this holiday season challenging for retailers is the time frame - as 2013 presents only 25 days between Black Friday and Christmas as against 31 days last year. Moreover, retailers, who witness more traffic during weekends, will have only 4 full weekends this time around versus 5 in 2012.

To make the most of the season ahead, Kohl's Corp. ( KSS ) has decided to keep its stores open at a stretch for 100 hours for the first time ever, starting at 6 a.m. on Dec. 20 through 6 p.m. on Christmas Eve.

Consumer spending is a primary component of the economy, and the way consumers behave during the holiday season will give a rough idea to investors about the health of the U.S. economy. The political tussle and the 16-day partial U.S. government shutdown, uneven economic recovery and soft job opportunities are keeping investors jittery.

Amid such a scenario, NRF is anticipating consolidated sales for November and December to grow approximately 3.9% to $602.1 billion. Data compiled by ShopperTrak suggest that retail sales are projected to increase 2.4% this holiday season. However, the expected growth rate has tempered down from 3% registered in 2012, 4% in 2011 and 3.8% in 2010, hinting at a stiff competition.

We believe that retailers have to cover those extra miles this holiday season with compelling pricing, promotional strategies, and new products launches to attract the shoppers, but chances of hurting margins cannot be ignored. Despite lingering concerns, we hope the arrival of Christmas drives demand higher and shed consumers' apprehension.



BUCKLE INC (BKE): Free Stock Analysis Report

COSTCO WHOLE CP (COST): Free Stock Analysis Report

GAP INC (GPS): Free Stock Analysis Report

PENNEY (JC) INC (JCP): Free Stock Analysis Report

KOHLS CORP (KSS): Free Stock Analysis Report

L BRANDS INC (LB): Free Stock Analysis Report

ZUMIEZ INC (ZUMZ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: BKE , COST , GPS , NRF , SMRT

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