--Same-store sales rose 4.5%; 3.3% increase was expected
--Macy's, Gap among December standouts
--Target, Kohl's give disappointing outlooks
(Adds information about results in paragraphs four through
seven, Macy's lowering guidance in ninth paragraph.)
By Karen Talley and Anna Prior
Cautious U.S. consumers restrained their spending in December,
making for a generally mixed holiday season for retailers at what
is usually their busiest time of the year.
A reluctance to spend as the fiscal cliff loomed held some
purchasing in check, compounded by Hurricane Sandy in the Northeast
and the lack of cold weather that generally spurs buying. The
better performers last month included Costco Wholesale Corp.
(COST), Nordstrom Inc. (JWN) and Gap Inc. (GPS), while Target Corp.
(TGT), Limited Brands Inc. (LTD) and some apparel retailers were
weak.
"It was a very complicated month, with all sorts of events that
threatened fragile expectations," said Barbara Kahn, marketing
professor at the University of Pennsylvania's Wharton School.
"Online was a saving grace for some of the retailers as people
shift in that direction."
Over all, the 17 retailers tracked by Thomson Reuters reported
4.5% growth in same-store sales in December, above expectations of
3.3% growth and the 4.2% increase from a year earlier. However,
this year's increase would have been 2.8% without results from
Costco, the most heavily weighted company on the Thomson index.
Retailers didn't appear to have been helped by the bigger
timeframe than in 2011 between Thanksgiving and Christmas,
something that was seen in the fall as spurring greater sales. It
turned out, "consumers had a set amount to spend," said Nancy Liu,
retail strategist at Kurt Salmon. "Just because they had more time
didn't mean they spent more."
Also dinging the better-than-expected sales results, seven
retailers Thursday provided quarterly earnings guidance below
expectations, while only two offered brighter prospects, according
to research firm Retail Metrics. "This suggests some of the sales
may have come at the expense of some margin," Retail Metrics
President Ken Perkins said.
Target was one of the retailers that gave a disappointing
outlook, saying it sees fourth-quarter earnings only meeting or
somewhat exceeding the low end of its expectations.
"December sales were slightly below our expectations, as strong
results late in the month did not completely offset softness in the
first three weeks," Target Chief Executive Gregg Steinhafel said.
Target reported flat same-store sales when a 0.8% rise was
expected.
Macy's Inc. (M), meanwhile, said same-store sales rose 4.1% in
December, just past expectations for 4% growth, but the retailer
still lowered its fourth-quarter guidance.
"While the rate of growth was somewhat less than we had expected
in the first two months of the fourth quarter, it came amid some
significant headwinds from uncertain economic news and the
lingering effects of Hurricane Sandy," Macy's Chief Executive Terry
Lundgren said. Macy's said it benefited from its "omnichannel"
strategy that relies on both stores and online avenues.
Kohl's Corp. (KSS) posted a 3.4% gain in same-store sales, when
a 1.2% increase was expected. But the department-store chain said
it was disappointed with results for the month and slashed its
guidance for the fourth quarter, which closes at the end of
January. Kohl's now expects earnings per share of $1.60 to $1.62,
compared with previous guidance of $2 to $2.08 a share.
"December sales were lower than planned," Kohl's Chief Executive
Kevin Mansell said. "Additionally, sales came late in the holiday
shopping season and, as a result, were at deeper discounts than
planned. We are taking the necessary markdowns in the fourth
quarter to manage our inventory as we transition into the spring
season."
Gap reported December same-store sales rose 5%, while analysts
expected a 3.5% increase. All three North American brands--Gap,
Banana Republic and Old Navy--posted comparable-sales growth, while
its international segment reported a 6% decline. Gap also announced
it approved a new $1 billion share-repurchase program.
Luxury retailer Nordstrom also had a strong December, reporting
an 8.6% increase in same-store sales, when a 3.4% rise was
expected. Same-store sales at full-line stores combined with online
rose 8.2%, while Nordstrom's Rack outlet posted an 8.1%
increase.
Costco remained a standout, posting a gain of 8% in U.S.
same-store sales minus gasoline; analysts expected a 5.3% rise. The
mass merchant said its sales for the month benefited by about 2%
from an extra selling day because of the timing of the New Year's
holiday. Stores also were busier, with comparable traffic frequency
posting a gain of slightly more than 5%.
Limited Brands, operator of Victoria's Secret and Bath &
Body Works, reported a rare miss, posting a same-store sales
increase of 3%, when a 4.5% rise was expected. Flat results at
Victoria's Secret more than offset 7% growth at Bath & Body
Works. While the company said merchandise margins rose from a year
earlier, the increase was "below expectations."
Apparel retailer Cato Corp. (CATO) posted a 7% drop in
same-store sales when a 1% decline was projected. "December
same-store sales results were well below expectations and our
year-to-date trend," Chief Executive John Cato said, as the company
lowered its fourth-quarter guidance.
Teen retailer Wet Seal (WTSLA) posted a 9.7% decline in
same-store sales when a 5% decline was expected and said its
fourth-quarter loss will be at or near the low end of its initial
projection. The disappointing December showing was driven mainly by
lower-than-expected transactions throughout the month, the company
said.
December same-store sales at fellow teen retailer Buckle Inc.
(BKE) rose 1% compared with the year-earlier period, while a
decrease of 0.3% was expected. Over all, shoppers appeared to spend
more, with the average transaction value rising about 5.5%, the
company said.
Zumiez Inc. (ZUMZ), a teen retailer with a focus on
action-sports apparel, equipment, and accessories, posted a 1%
decrease in December same-store sales when a 3.6% decline was
expected.
The so-called fiscal cliff had loomed large in December,
promising a package of spending cuts and tax increases for the new
year if lawmakers couldn't work out an alternative. Earlier this
week, U.S. policy makers reached a compromise in their budget
dispute and struck a deal to avoid the worst of the fiscal
cliff.
Write to Karen Talley at karen.talley@dowjones.com and Anna
Prior at Anna.Prior@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires