Holiday Sales Figures Disappointing for U.S. Stores

By Diana Middleton, The Florida Times-Union, Jacksonville

Jan. 5–Stein Mart Inc., like many other retailers, reported disappointing December sales Thursday.

Stein Mart’s December same store sales — often considered the most reliable way to measure a retailer’s success — were flat when compared to December 2005 sales results. However, the Jacksonville- based retailer’s total sales were up 2.1 percent from the previous year, totaling $216.2 million in December. Year-to-date same store sales were down 1.2 percent, with total sales for the year-to-date remaining flat.

“We are disappointed with our flat comparable store sales in December,” said Michael Fisher, president and chief executive officer of Stein Mart, in a statement. “The early weeks were negative, but sales improved as Christmas approached and were capped by a strong post-Christmas finish, although we took aggressive markdowns of seasonal and cold-weather merchandise to liquidate inventories.”

Stein Mart’s statement noted that the company expects earnings per share of approximately 38 to 40 cents for the fourth quarter of fiscal 2006, down from the 48 cents per share in 2005′s fourth quarter.

“While the Company still anticipates January comparable store sales will be approximately flat to last year, the combination of aggressive markdowns in December and January with lower-than-planned sales in December will negatively impact profitability for the quarter,” said the statement from Stein Mart.

Nationwide, an already disappointing holiday shopping season turned out to be even worse than expected for many of the nation’s retailers, the Associated Press reported.

The downbeat results came from merchants in all retail categories, particularly from apparel sellers who struggled with depressed sales of cold weather items like heavy coats amid mild weather across the country. Wal-Mart Stores Inc. posted better-than-expected results for December following a dismal November, but the discounter’s overall holiday season was the worst on record, analysts said.

December’s sales results could be a harbinger of weak profits when retailers release fourth-quarter results next month. One big exception was luxury retailers, whose performance continued to beat Wall Street estimates.

Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass., said retailers were forced to mark down heavily.

“This was a promotional Christmas,” he said. “Consumers clearly waited until the last minute.” Such aggressive discounting led a number of merchants including Zale Corp., BJ’s Wholesale Club Inc., Gap Inc. and AnnTaylor Stores Corp. to cut their profit outlooks.

Based on 51 stores that reported, Perkins said 23 retailers beat sales expectations, 25 missed estimates and three stores matched projections.

The International Council of Shopping Centers-UBS sales tally posted a 3.1 percent gain in December, in line with its original expectations. That means for the November-December period, same-store sales averaged a 2.8 percent gain, slightly below the original forecast of 3 percent. The tally is based on same-store sales, or sales at stores open at least a year; these sales are the industry’s standard for measuring retailers’ health.

Michael Niemira, chief economist at ICSC, said, “The tone was more pessimistic than optimistic. I think when you look back, November-December may be a good bellwether for the industry performance for this year.” After a solid start to the holiday season, many stores struggled with disappointing business in December, and a shopping surge in the days just before and after Christmas wasn’t strong enough to make up for lost sales. Merchants tried to stick to their previously planned discounts, but at the seaon’s end they resorted to bigger-than- anticipated cuts to pull shoppers in.

Mild weather across much of the country meant consumers were in no hurry to buy cold weather wear such as coats and gloves, depressing sales at many apparel stores. Declining gasoline prices and a steady job market should have helped merchants, but Perkins believes the recent drop in home equity loans — a big source of buying power over the past few years — curtailed spending among middle-income shoppers.

Sales results were also hurt by two big shifts in the way consumers are shopping: the increasing popularity of gift cards and robust online buying, which is not included in same-store results. Gift card sales are only posted when they are redeemed rather than bought, helping to extend the holiday season into January.

Wal-Mart, which warned earlier in the season that its same-store sales gain would be no better than 1 percent, posted a 1.6 percent increase for December. Retail industry analysts polled by Thomson Financial expected 1 percent gain.

The results followed Wal-Mart’s 0.1 percent decline in same-store sales in November, its first monthly same-store sales drop in a decade.

Wal-Mart had its weakest December performance since 2000, when it posted a 0.3 percent gain, according to Thomson Financial. The slim 0.8 percent increase for November and December combined was the worst since Thomson Financial began tracking same-store sales data in 1995.

Wal-Mart has struggled with a mix of problems, including the fact that its lower-income customers were hurt by soaring gas prices. But the company’s lackluster sales have persisted even as the cost of gas retreated — partly because its attempt to broaden its appeal to higher-income shoppers was poorly executed, particularly in apparel and home furnishings.

Wal-Mart reported Thursday that it had a strong performance in electronics and groceries in December.

Rival discounter Target Corp. had a 4.1 percent gain in same-store sales, below the 4.5 percent estimate.

Costco Wholesale Corp. posted a 9 percent gain in same-store sales, beating Wall Street’s 5.7 percent estimate. BJ’s Wholesale had a 0.6 percent same-store sales gain, below the 1.3 percent estimate.

Federated Department Stores Inc., which acquired May Department Stores Co. last year, had a 4.4 percent gain in same-store sales, below the 5.5 percent estimate from Wall Street. The same-store results include only the Macy’s and Bloomingdale’s stores that existed before September, when the company transformed most of the former May Co. stores to Macy’s units.

Terry Lundgren, Federated’s chairman, noted that performance at the converted May stores improved in December.

J.C. Penney Co. Inc. had a 2.6 percent gain in same-store sales at its department stores, slightly better than the 2.4 percent estimate.

Its Internet sales rose 15.2 percent in December.

Nordstrom Inc. reported a robust 9 percent same-store sales gain, exceeding the 4.3 percent forecast. Luxury operator Saks Inc. had an 11 percent same-store sales gain, twice the 5.3 percent estimate.

Pier 1 Imports Inc. suffered a 10.7 percent drop in same-store sales, worse than the 9.4 percent analysts anticipated. Zale, which did not break out December same-store sales figures, reported a same-store sales increase of 2.3 percent for November and December. It said profit margins suffered due to aggressive price cutting.

Limited Brands had a 4 percent gain, well below the 9.3 percent Wall Street expected.

Gap, which has long been struggling with its merchandising formula, suffered an 8 percent drop in same-store sales, worse than the 5 percent estimate. As a result, the company said it was slashing its annual profit outlook.

AnnTaylor posted a 5.3 percent decline in same-store sales; analysts predicted a 0.6 percent gain.

Among teen retailers, Pacific Sunwear of California Inc. had a 3.2 percent dip in December, worse than the 2.9 percent forecast.

Material from the Associated Press was used in this report.

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