Retailers report weak results for December
Posted: Sunday, January 13, 2008
NEW YORK (AP) -- The economic outlook became more uncertain fter many of the nation's big retailers reported weaker than expected holiday sales, the result of consumers cutting their spending due to higher energy prices and the ongoing housing slump.
Many merchants failed to meet their already lowered sales projections during December, and their performance during this critical sales period led some stores to reduce earnings outlooks for the fourth quarter.
The weak results crossed all retail categories. Particularly hard hit were apparel sellers including Limited Brands Inc. and AnnTaylor Stores Corp., as well as department stores including Macy's Inc. Among the few bright spots were low-price operators like Wal-Mart Stores Inc., which posted results that exceeded Wall Street expectations, as it benefited from shoppers trading down to cheaper stores amid higher gas prices and a slumping housing market. Wal-Mart operates a number of Supercenters in Siouxland.
"Overall, the holiday season was dismal," said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. "Consumers are definitely feeling the pain."
A number of chains including Macy's and Target Corp. saw their sales depressed in December in part by a quirk in the calendar, which pushed the post-Thanksgiving shopping week into November rather than December. Analysts say it is best to look at the combined November-December figures to get a better picture.
Still, it was clear the slowing economy made shoppers frugal during the holiday shopping season. Lured by fat discounts, shoppers jammed stores over Thanksgiving weekend, the start of the holiday shopping season, but they didn't return until the final days before Dec. 25, when stores were stepping up their promotions and the discounts were even deeper. December sales results also got some lift from post-Christmas shopping as consumers bought holiday leftovers. Such late buying cut into profits, according to analysts.
The UBS-International Council of Shopping Centers' same-store sales tally was up a meager 0.9 percent in December, worse than the original prediction of 1.5 percent. That means the November-December period was up 2.2 percent, the weakest holiday period since 2002 when holiday sales rose 0.5 percent. Same-store sales are sales at stores open at least a year and are considered a key indicator of a retailer's health.
The November-December pace was in line with the average for retailers' fiscal year, which begins in late January, but it is well below the 3.6 percent pace in the same year-ago period.
A growing concern for retailers -- and, in turn, their suppliers -- is the weakening of the job market, which had helped prop up spending for most of 2007. On Friday, the Labor Department's jobs report showed that hiring practically stalled in December, driving the nation's unemployment rate up to a two-year high of 5 percent. Another concern is the escalating credit crisis.
Such deterioration in housing and in the credit markets has caused some economists including Goldman Sachs' Jan Hatzius and Ed McKelvey to forecast a recession in 2008. But it will be relatively mild and the economy will recover as soon as 2009, according to the Goldman Sachs note released Wednesday.
Discount rival Target, which has a store at Sioux City's Sunnybrook Plaza, reported a 5 percent decline in same-store sales. But on a calendar-adjusted basis, same-store sales declined 0.6 percent, compared to the 2.5 percent analysts expected. The company, which appears to be struggling with internal operational issues, said it continues to believe that its fourth-quarter earnings results won't meet last year's performance.
TJX Companies Inc., which operates off-price chains including T.J. Maxx, which is closing its Sioux City store this month, had a 3 percent increase in same-store sales, in line with the 3.3 percent estimate. The retailer raised its fourth-quarter outlook.
But most mall-based stores struggled. Macy's posted a 7.9 percent drop in same-store sales, worse than the 6.5 percent forecast. For the November-December period combined, Macy's same-store sales were down 1.1 percent.
J.C. Penney, one of the anchors at Sioux City's Southern Hills Mall, posted a 7.5 percent decline in same-store sales in its department store business, matching Wall Street expectations. The company now believes fourth-quarter results will be at the low end of its projections.
Many merchants failed to meet their already lowered sales projections during December, and their performance during this critical sales period led some stores to reduce earnings outlooks for the fourth quarter.
The weak results crossed all retail categories. Particularly hard hit were apparel sellers including Limited Brands Inc. and AnnTaylor Stores Corp., as well as department stores including Macy's Inc. Among the few bright spots were low-price operators like Wal-Mart Stores Inc., which posted results that exceeded Wall Street expectations, as it benefited from shoppers trading down to cheaper stores amid higher gas prices and a slumping housing market. Wal-Mart operates a number of Supercenters in Siouxland.
"Overall, the holiday season was dismal," said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. "Consumers are definitely feeling the pain."
A number of chains including Macy's and Target Corp. saw their sales depressed in December in part by a quirk in the calendar, which pushed the post-Thanksgiving shopping week into November rather than December. Analysts say it is best to look at the combined November-December figures to get a better picture.
Still, it was clear the slowing economy made shoppers frugal during the holiday shopping season. Lured by fat discounts, shoppers jammed stores over Thanksgiving weekend, the start of the holiday shopping season, but they didn't return until the final days before Dec. 25, when stores were stepping up their promotions and the discounts were even deeper. December sales results also got some lift from post-Christmas shopping as consumers bought holiday leftovers. Such late buying cut into profits, according to analysts.
The UBS-International Council of Shopping Centers' same-store sales tally was up a meager 0.9 percent in December, worse than the original prediction of 1.5 percent. That means the November-December period was up 2.2 percent, the weakest holiday period since 2002 when holiday sales rose 0.5 percent. Same-store sales are sales at stores open at least a year and are considered a key indicator of a retailer's health.
The November-December pace was in line with the average for retailers' fiscal year, which begins in late January, but it is well below the 3.6 percent pace in the same year-ago period.
A growing concern for retailers -- and, in turn, their suppliers -- is the weakening of the job market, which had helped prop up spending for most of 2007. On Friday, the Labor Department's jobs report showed that hiring practically stalled in December, driving the nation's unemployment rate up to a two-year high of 5 percent. Another concern is the escalating credit crisis.
Such deterioration in housing and in the credit markets has caused some economists including Goldman Sachs' Jan Hatzius and Ed McKelvey to forecast a recession in 2008. But it will be relatively mild and the economy will recover as soon as 2009, according to the Goldman Sachs note released Wednesday.
Discount rival Target, which has a store at Sioux City's Sunnybrook Plaza, reported a 5 percent decline in same-store sales. But on a calendar-adjusted basis, same-store sales declined 0.6 percent, compared to the 2.5 percent analysts expected. The company, which appears to be struggling with internal operational issues, said it continues to believe that its fourth-quarter earnings results won't meet last year's performance.
TJX Companies Inc., which operates off-price chains including T.J. Maxx, which is closing its Sioux City store this month, had a 3 percent increase in same-store sales, in line with the 3.3 percent estimate. The retailer raised its fourth-quarter outlook.
But most mall-based stores struggled. Macy's posted a 7.9 percent drop in same-store sales, worse than the 6.5 percent forecast. For the November-December period combined, Macy's same-store sales were down 1.1 percent.
J.C. Penney, one of the anchors at Sioux City's Southern Hills Mall, posted a 7.5 percent decline in same-store sales in its department store business, matching Wall Street expectations. The company now believes fourth-quarter results will be at the low end of its projections.
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