Retailers in U.S. Get `Reality Check' as Snowstorms Slam Brakes on Demand
The best holiday shopping season in five years lost luster after sales at some U.S. retailers fell short of analysts’ projections.
Sales at stores open more than a year rose 3.2 percent in December, according to Retail Metrics Inc. That compared with the 3.5 percent average of estimates compiled by the firm and a 5.5 percent increase in November. Retail stocks fell, led by Gap Inc. and Target Corp. as both missed estimates and dropped more than six percent.
While a winter storm that struck the Northeast the day after Christmas hurt sales, many U.S. consumers continued to exercise restraint, said Brian Sozzi, a retail analyst for Wall Street Strategies in New York.
“This was a reality check,” Sozzi said today. “November was encouraging, but it’s still a selective consumer and once they reach their budget, they aren’t willing to go over it.”
Today’s results came after revenue for the holiday period, which can make up as much of 40 percent of retailer’s annual revenue, rose 5.5 percent to $584 billion for the best performance in five years, according to MasterCard Advisors’ SpendingPulse.
Those sales figures may have pushed expectations “ahead of reality,” said Christine Chen, a San Francisco-based analyst for Needham & Co. “In peak weeks, you saw strong traffic and in between things were more disappointing.”
Retail Index
The Standard & Poor’s 500 Retailing Index sank 1.7 percent to 500.58 at 12:33 p.m. New York time. The measure rose to its highest level since July 2007 on Jan. 3, this year’s first day of trading. Gap fell $1.71 to $20.52 in New York Stock Exchange composite trading while Minneapolis-based Target slumped $3.93 to $55.01, the most in almost two years.
Most chains count locations open at least a year to tabulate same-store sales. This kind of revenue is a key indicator of a retailer’s growth because new and closed sites are excluded.
Target, the second-largest U.S. discount chain, posted a gain of 0.9 percent, below the 3.9 percent average increase indicated by estimates compiled by Retail Metrics. Sales at Gap, the largest U.S. apparel retailer, fell 3 percent, compared with projection for a 2.4 percent increase. Gap did reiterate its profit forecast for this quarter.
“After a strong start to the holiday season in November, sales and traffic trends for our brands were less consistent in December,” Gap Chief Financial Officer Sabrina Simmons said in a statement today.
Teen Retailers Mixed
Teen retailer Abercrombie & Fitch Co. stood out with a sales increase of 15 percent, surpassing the average estimate of 10 percent. Competitors American Eagle Outfitters Inc. and Aeropostale Inc. posted declines that fell below projections.
A Dec. 26 blizzard that dumped more than a foot of snow on parts of the U.S. Northeast “disrupted” post-holiday shopping, said Macy’s Inc. Chief Executive Officer Terry Lundgren, whose department-store chain’s results also missed predictions. That may have pushed some sales into January, according to Customer Growth Partners’ Craig Johnson.
“Snowstorms do not destroy demand, they simply displace demand,” said Johnson, president of the New Canaan, Connecticut-based retail consulting firm. “Those gift cards don’t disappear, they get redeemed in January.”
To contact the reporters on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net; Matt Townsend in New York at mtownsend9@bloomberg.net
To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net
December Retail Sales Damped by Snow as Some Miss Estimates
Stan Honda/AFP/Getty Images
Tourists walk thorugh a nearly empty Times Square Dec. 27, 2010 in New York after a blizzard dropped 18 to 20 inches of snow in the area.
Tourists walk thorugh a nearly empty Times Square Dec. 27, 2010 in New York after a blizzard dropped 18 to 20 inches of snow in the area. Photographer: Stan Honda/AFP/Getty Images
Jan. 6 (Bloomberg) -- Adrianne Shapira, a retail analyst at Goldman Sachs & Co., discusses retail sales for December and the outlook for 2011. Sales at Gap Inc., Target Corp. and other U.S. retailers fell short of analysts’ projections last month as more people shopped early for the holidays and bad weather kept them from stores afterward. Shapira speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
Jan. 6 (Bloomberg) -- Gregory Melich, an analyst at International Strategy and Investment, talks about the outlook for U.S. retailers. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
December Retail Sales Damped by Snow as Some Miss Estimates
Peter Foley/Bloomberg
Pedestrians and vehicles make their way through snow and high winds in Times Square in New York.
Pedestrians and vehicles make their way through snow and high winds in Times Square in New York. Photographer: Peter Foley/Bloomberg
Rate this Page
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.