It’s now time for retailers to report exactly how good (or bad) the holiday shopping season was last year. While the importance is well reported, the numbers usually are a harbinger for consumer sentiment and coming spending levels.
Anna Prior wrote for the Wall Street Journal that many stores had a tough season, with big-box store Costco as a lone standout:
Heavy discounting and slow traffic weighed on retailers’ December sales results, but Costco Wholesale Corp. COST +3.91% was among the few that bucked the trend.
The wholesale club reported sales at stores open at least a year rose 5% for the month, topping expectations for a 2.6% increase. Among the stronger performing categories were garden, automotive, apparel, small appliances and home furnishings. The consumer electronics category posted improvement from recent months, but the metric still declined slightly.
A number of retailers have offered disappointing holiday updates in recent days, suggesting the critical holiday period was marked by heavy promotions, especially for apparel and consumer electronics.
Although sales and store traffic appeared to pick up at the beginning of the Thanksgiving holiday weekend, shoppers took a break and didn’t start buying in earnest again until the week before Christmas.
At the same time, online sales were stronger than expected, but Ken Perkins of Retail Metrics said shopping on the web likely didn’t expand the overall spending pie so much as shift how and where that money was spent.
Driven largely by Costco, the eight retailers tracked by Thomson Reuters that have reported so far recorded a 2.7% increase in December same-store sales, or sales at stores open at least a year. Gap Inc. GPS +0.56% is scheduled to report after the market closes. Thomson Reuters projects the nine companies to post 1.9% growth, compared with a 7.2% increase a year earlier.
The New York Times reporter Julie Bosman wrote a story about Barnes & Noble’s lackluster year:
Barnes & Noble, the nation’s last remaining major bookstore chain, experienced steep sales declines in its digital division during the nine-week holiday period, the company announced on Thursday.
Revenue in the Nook division, which includes digital content and devices, was $125 million, a 60 percent drop compared with the period a year earlier.
Sales in its brick-and-mortar bookstores were less grim, with a 6.6 percent decrease from the previous year, to $1.1 billion.
The numbers reflect Barnes & Noble’s decreasing digital ambitions, as it declined to release a new color tablet in 2013. The bookseller has said it will pull back from trying to compete in the crowded tablet market against big companies like Amazon and Apple.
The release of the sales data came one day after Barnes & Noble announced that it had filled the long-vacant post of chief executive with a company insider, Michael P. Huseby, previously the president of Barnes & Noble and chief executive of Nook Media.
Reuters’ Phil Wahba reported that many retailers were beginning to cut earnings forecasts after discounts cut into their holiday numbers:
Many large U.S. retailers slashed their earnings forecasts on Thursday because of steep discounts they offered during the holidays to persuade reluctant consumers.
The discounts boosted overall industry sales but hurt profits at many chains, including L Brands Inc, Family Dollar Stores Inc and teen retailer Zumiez Inc. Even retailers that reported big sales gains, like Kay Jewelers parent Signet Jewelers Ltd, were not spared.
Fewer store visits and aggressive pricing at the start of the season by big retailers like Amazon.com Inc and Wal-Mart Stores Inc left many chains with little choice but to offer sweeter deals. Many also had too much holiday merchandise, which was ordered in late spring when retail executives were feeling upbeat.
“The discounts needed to be deeper, and they needed to be longer,” said Joel Bines, managing director of consulting firm AlixPartners.
The discounts did result in a stronger-than-expected 2.7 percent increase in December sales at the eight retailers tracked by the Thomson Reuters Same-Store Sales Index.
Still, L Brands cut its holiday-quarter profit forecast on disappointing December sales at its Victoria Secret and La Senza chains.
While L Brands’ sales at stores open at least year rose 2 percent last month, Wall Street had been expecting a gain of 3.7 percent, according to Thomson Reuters I/B/E/S. The company’s shares fell more than 4 percent.
Bloomberg’s Nick Taborek reported that retail stocks slid across the board on the news, indicating that investors are leery of what’s coming for many stores:
Retailers retreated 0.2 percent as a group. Companies from L Brands, which owns the Victoria’s Secret and Bath & Body Works brands, to discount chain Family Dollar (FDO) cut profit forecasts, showing the price war that marked the holiday season is taking a toll.
Family Dollar slid 2.1 percent to $64.97 and L Brands lost 4.1 percent to $57.75. The companies cut profit forecasts after reporting disappointing December sales as promotions that failed to lure shoppers hurt margins.
Bed Bath & Beyond slumped 12 percent to $69.75. The retailer projected fourth-quarter earnings of $1.60 to $1.67 a share, less than the $1.79 that analysts had estimated. Home-goods merchant Pier 1 Imports Inc. tumbled 12 percent to $20.44 as it also lowered its quarterly forecast.
While the Federal Reserve Board watches for more signs of growth in order to continue pulling back from its bond-buying program, signs that the economic recovery will continue are mixed. It doesn’t bode well if the backbone of the economy is cutting earnings forecasts and bracing for steeper discounts.
