Retailers face an uncertain 2006 as they report modest holiday sales |

Retailers face an uncertain 2006 as they report modest holiday sales

Anne D'Innocenzio

NEW YORK – Retailers faced an uncertain 2006 Thursday after December’s modest sales gains showed that the holiday shopping season, while overall respectable, was disappointing for some of the nation’s most prominent merchants. As expected, Wal-Mart Stores Inc. was one of the stragglers, falling short of Wall Street’s expectations and warning about its fourth-quarter profits.It was clear as stores released their monthly sales figures that consumers, mindful of the rising costs of energy and borrowing money, were particularly cautious during the holidays.Winning retailers included Target Corp., Costco Wholesale Corp., upscale stores such as Nordstrom Inc., and teen retailers like Abercrombie & Fitch Co. Gap Inc., Sears Holdings Corp. and Kohl’s Corp. were among the other disappointments.”This is not a great showing, but not a poor showing. It is somewhere in between,” said Michael P. Niemira, chief economist at the International Council of Shopping Centers. “Consumers are not splurging everywhere. It is a little here and there. The consumer is very selective.”Niemira noted that retailers will face a tougher environment over the next few months as higher heating bills, a weakening housing market and rising interest rates will probably curb consumer spending.One potential bright spot is a steadily improving job market, which helped boost consumer confidence last month. The Labor Department reported Thursday that the number of newly laid-off workers filing claims for unemployment benefits fell last week to the lowest level in more than five years.”As long as people can find the right merchandise, have a job and borrow a little bit, they are going to go shopping,” said Richard Hastings, an analyst at Bernard Sands LLC, who was more upbeat. “Overall, the holiday season was good. Retailers who had it all nailed down were the winners.”The UBS-International Council of Shopping Centers retail sales tally posted a modest 3.2 percent sales gain, at the mid-point of the 3 percent to 3.5 percent growth forecast for the month. The tally is based on same-store sales or sales at stores open at least a year, considered the best indicator of a retailer’s health.That means November-December sales were up 3.5 percent, the high end of Niemira’s forecast, but a bit below the 3.7 percent pace for the entire fiscal year. Niemira expects the sales pace could average a more modest 3 percent this year.After an uneven start to the holiday season, many retailers struggled in December as shoppers appeared to procrastinate even more than in the past. The exceptions were those selling hot consumer electronics items like Microsoft Corp.’s Xbox 360 and digital music players, all of which were snapped up by shoppers early in the season.A variety of factors created more angst for merchants. They included a late Hanukkah and the New York City transit strike, which occurred in the critical final days before Christmas, hurting retailers in Manhattan.Another factor that depressed December figures was robust online spending, which is excluded from retailers’ same-store sales. According to comScore Networks, online holiday spending excluding travel rose a better-than-expected 25 percent to $19.6 billion, compared to a year ago.Gift card sales also pushed December business into January or even later; gift card sales are only recorded when they are redeemed.Niemira expects same-store sales to rise anywhere from 3 percent to 3.5 percent in January, boosted by gift card redemption. But how and when customers use their gift cards will determine the strength of fourth-quarter profits. According to Hastings, profits look “like they held up,” as stores generally kept to their planned discounting strategy. But merchants who rushed in spring merchandise and new winter clothing the day after Christmas are counting on gift card holders to pay regular price.Wal-Mart warned that its profits would be disappointing, at the low end of expectations. The company reported a slim 2.2 percent same-store sales gain for December. The results – the weakest December performance since 2000 – missed the 2.4 percent estimate from analysts surveyed by Thomson Financial.Hastings attributed the weakness to two factors: sales of low-margin food that outpaced demand for general merchandise and a modest performance at the company’s Sam’s Club, which sells high-ticket items.Rival Target, which had a slow start to the holiday season, rebounded with a 4.7 percent same-store sales gain in December, better than the 4.6 percent estimate.Kohl’s posted a 4.6 percent gain in same-store sales, below the 5.4 percent estimate. The company reduced it’s fourth-quarter outlook.Sears Holdings said same-store sales tumbled 11.9 percent at it’s Sears stores for the nine-week period ended Dec. 31 because of a lack of special promotions. Meanwhile, same-store sales at it’s Mart stores rose 1 percent.Costco posted a 7 percent gain in same-store sales, beating the 6 percent estimate.Luxury retailers had a strong December following an unusually slow November. Nordstrom reported a 7.7 percent gain in same-store sales, much better than the 3.8 percent forecast.Federated Department Stores Inc.’s same-store sales rose 3.4 percent, better than the 2.1 percent forecast.J.C. Penney Co. Inc had a 2.2 percent same-store sales gain in its department store group, missing the 2.5 percent analyst estimate.Gap posted a 9 percent decline in same-store sales, worse than the 3.8 percent drop analysts expected.Abercrombie & Fitch had a 29 percent gain in same-store sales, beating the 18.2 percent estimate from Wall Street.On Wednesday, American Eagle Outfitters Inc. announced a 9.8 percent same-store sales gain, exceeding the 3.5 percent estimate.Vail, Colorado

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