December retail store sales solid but below expectations after November surge

February 25, 2011

Retailers’ plans to kick shoppers off the couch and into the mall earlier than ever this holiday season worked a little too well.

After responding with vigor to stores’ endless blockbuster promotions in November, consumers found themselves tuckered out by December. That left many retailers on Thursday reporting December sales that were weaker than expected.

Cheap-chic discounter Target, for example, said key gift-giving categories performed well early in the holiday season, eating into the December sales results. The company reported a 0.9 percent increase from December 2009 at established stores, below its forecast. Gap said sales dropped 3 percent amid inconsistent foot traffic.

The sales data from about 30 national chains are the first glimpse of how the retail industry performed during the all-important holiday shopping season — and how comfortable consumers were with pulling out their wallets. Retailers calculate the results from stores that have been open at least a year, a key measure of health known as same-store sales.

“The holiday numbers overall look solid, but this was not the December many had hoped for,” said Amy Noblin, an analyst with Weeden & Co.

The Christmas shopping season is critical for retailers because it accounts for about 20 percent of annual sales. Many began rolling out the holiday deals earlier than ever this year — with Sears and Kmart starting before Halloween — in an effort to lock in sales after two years of consumer frugality. Some stores held Black Friday-style sales throughout November, complete with midnight openings and door-buster promotions that ended up shifting some sales away from December.

According to the International Council of Shopping Centers, December sales at stores open at least a year were up 3.1 percent from the previous December. In another measure, Kantar Retail, a consulting and research firm, said combined sales for all of the retailers reporting data on Thursday rose 3.2 percent in December from a year ago — a respectable number but one that pales in comparison with November’s 5.6 percent jump.

“It’s clear that November’s great in-store deals robbed spending from December,” said Frank Badillo, a Kantar Retail senior economist.

Teen retailers suffered the biggest blow. Wet Seal and Hot Topic both reported declines. At Aeropostale, executives blamed the late-December snowstorm that trampled the Northeast for part of its 5 percent drop in sales, though the chain is still on track to meet its earnings forecast for the quarter. Sales at American Eagle Outfitters dropped 11 percent, and the company lowered its earnings guidance.

“While the company achieved satisfactory results in men’s and women’s denim and the direct-to-consumer business, overall December sales deteriorated from the more encouraging trends experienced in November,” American Eagle said in a statement.

Still, several retailers showed continued strength into December. Limited Brands beat analysts’ expectations with a 5 percent spike in sales. Its Victoria’s Secret stores performed particularly well, recording an 8 percent increase compared with a 6 percent decline in December 2009. Value retailer Kohl’s saw a 3.9 percent gain in sales that prompted the company to raise its earnings forecast for the quarter.

Department stores turned in a strong showing, with Nordstrom up 8.4 percent and Saks soaring 11.8 percent. Mid-tier chains such as Macy’s and Dillard’s also saw sales gains. Macy’s chief executive Terry S. Lundgren said in a statement that shoppers sought out not only value but also fashion items, a sign that recession-minded frugality may be lifting.

“Even in bad months you found that some retailers were performing well,” said Madison Riley, managing director of retail consulting firm Kurt Salmon. “It often comes down to the individual company.”

Several chains also pointed to strength in their online divisions, though not every retailer includes those results in same-store sales calculations. Online retail has been one of the bright spots of the holiday season and hit several record highs over the past two months.

According to research firm ComScore, online spending reached nearly $31 billion this holiday season, up 13 percent from the previous year. That number was boosted by the same snowstorm that dampened bricks-and-mortar retailers, sending Internet sales during the week after Christmas rising by 17 percent. The biggest online shopping day of the year was the Monday after Thanksgiving Day, nicknamed “Cyber Monday,” raking in more than $1 billion.

“After the past few years’ struggles, it is gratifying to see e-commerce return to a state that can only be described as a very merry holiday shopping season,” ComScore Chairman Gian Fulgoni said.

muiy@washpost.com

Ylan Q. Mui is a financial reporter at The Washington Post covering the Federal Reserve and the economy.
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