Retailers kicked off the holiday season on a sour note with
disappointing November sales gains in reports out Thursday.
Deep discounts throughout the month didn't do much to spark a
spending spree, a sign that retailers could be in for some tough
sledding as they enter the holiday season's home stretch.
Sales at stores open at least a year rose 1.9% vs. a year
earlier, according to Ken Perkins, president of Retail Metrics.
Analysts had forecast a 2.9% gain. That was a sharp deceleration
from October's 4% increase.
Two of the best-performing retailers over the past five
years,Costco Wholesale (
) andL Brands (
), both missed November views. Their results, says Perkins,
reflect the tough retail environment that prompted widespread
discounting throughout the month, well before the usual Black
"The overall results were very disappointing," said Perkins.
"Santa delivered some early coal to retailers during November and
during the Thanksgiving/Black Friday holiday weekend. It says
that retailers are in for a real dogfight this holiday
Deep Discounts In Store?
Retailers are going to find it difficult to "squeeze blood
from a stone," he adds, given that most consumers don't have
excess discretionary dollars to spend.
It means that stores will have to offer 50% off or more to get
consumers to spend, Perkins says.
L Brands cited a late Thanksgiving as a major negative. For
November the company reported a sales decrease of 5% from
October, its first negative monthly comp since October 2009.
Analysts had forecast a 1.2% decrease. The parent of Victoria's
Secret indicated that it expects December comps to rise in the
low- to mid-single digits, Perkins says.
Costco's total company comps, including gasoline sales, were
up 2% vs. a year ago, missing views for a 3.5% gain. It was its
smallest gain for the giant warehouse club discounter dating back
to September 2009. Costco's core U.S. comps, excluding the impact
of gasoline sales, came in at a 3% rise, short of forecasts for a
Perkins says Costco's showing reflects the "broader consumer
caution out there and their unwillingness and inability to open
their purse strings."
Regional discounterStein Mart (
), a strong performer of late, was also off its game in November.
It posted a 3.1% rise in comps for the month, slightly missing
views for a 3.2% rise.
Apparel giantGap (
) gave some cheery news late Thursday when it reported a 2% rise
in November comps, well ahead of the 0.7% expected gain. But
action-sports retailerZumiez (
) saw a 1.7% lift, sharply missing forecasts for a 2.8% rise.
Perkins says the November showing overall "doesn't bode well
for the final stretch" of the holiday season -- it suggests the
holiday period will be weaker than expected.
A Warmer View
Despite the soft November showing, Michael Niemira, chief
economist at the International Council of Shopping Centers,
remains optimistic and is sticking to his November-December
"I know it's a very competitive environment for retailers and
consumers are very cautious," he said. "But the economics behind
all this is improving and, consequently, I remain optimistic
we'll see the kind of performance industrywide we had
The economic factors he refers to include a "strong" GDP
report on Thursday.
Niemira forecasts a gain of 3.4% vs. a year ago in GAFO
(general merchandise, apparel and accessories, furniture and
other) sales for November-December. That would compare with last
year's 3% increase, he says. Niemira calculates November comps
for the 12 monthly reporting retailers he tracks came in up 2.1%
vs. a year ag o.
He expects December same-store sales growth to come in at 3%
to 4%, and says that's conservative and may come in stronger --
as this year Cyber Monday sales will be pushed into December
while last year that online shopping frenzy occurred in
"Cyber Monday would give an even larger lift to December's
sales," Niemira said.
November's soft showing, Niemira says, raises some questions.
One is: "How representative of the broader industry were the
results, especially given the 10.1% gain in November same-store
salesJ.C. Penney (JCP) reported," he said. "Is J.C. Penney taking
market share from other retailers?"
Jharonne Martis, director of consumer research at Thomson
Reuters, has concerns about the holiday shopping season, given
November's soft results.
"November same-store sales are very worrisome," she said.
"They suggest that consumers are procrastinating and waiting for
last-minute deals. They believe that as they approach the holiday
the deals will get better. That doesn't bode well for retailers.
It's a very promotional environment, and that means they will
have to continue to do so."
Old Stock For New Year
Another concern for Martis: Thursday's revised GDP number
"suggests retailers have high inventory levels," she says, which
"speaks to discounting going into January." So when January
arrives and consumers use their gift cards, she adds, they'll do
so to buy discounted items vs. full-price items, which might hurt
the bottom line.
Thomson Reuters analysts have lowered their
November-through-January comp expectation to 1.7% from their
month-old 1.8% view. That would be slightly higher than last
year's 1.6% rise in comps for the quarter but still below the
"healthy" level of a 3% gain, Martis says.
Luxury and generally higher-end retailers will fare better
over the holiday season, Perkins says. They would includeMichael
Kors Holdings (KORS) andTiffany & Co. (TIF), both of which
shone in the latest quarter. Off-price retail operators such
asTJX Cos. (TJX) andRoss Stores (ROST) should also have a cheery
season, Perkins says. Teen apparel retailer and specialty apparel
chains, suffering right now, will continue to do so over the