Gap-Nordstrom December Sales Top Estimates on Discounts

Jan. 3 (Bloomberg) -- Sheila Dharmarajan reports on holiday retail sales. She speaks on Bloomberg Television's "Market Makers." (Source: Bloomberg)

Gap Inc. (GPS) and Nordstrom Inc. (JWN) reported December same-store sales that topped analysts’ estimates as retailers kept inventory lean in a tepid holiday season and attracted shoppers with last-minute discounts.

Sales at Gap, the largest U.S. specialty-apparel retailer, rose 5 percent, exceeding the average projection of 3.6 percent from analysts surveyed by researcher Retail Metrics Inc. Nordstrom, the Seattle-based chain of department stores, posted an 8.6 percent increase in same-store sales last month, beating the 3.6 percent estimate.

Retailers lured reluctant shoppers with late-December specials after Hurricane Sandy, the presidential election and the school shooting in Newtown, Connecticut, tempered earlier holiday spending. Retailers adapted inventories in anticipation that shoppers would slow purchases amid concern over tax increases from the now-concluded fiscal cliff negotiations, said Pamela Quintiliano, a retail analyst at Oppenheimer & Co.

“Expectations were so incredibly low,” Quintiliano, who is based in New York, said today in a telephone interview. “It’s not that things are robust, it’s just a little bit better than what people had anticipated.”

Same-store sales for the more than 20 companies tracked by Swampscott, Massachusetts-based Retail Metrics rose 4.8 percent last month, excluding drugstores, beating the estimate for a 3.4 percent gain, the firm said in a report today. That follows a 1.6 percent gain in November.

Target Results

The overall shopping season will be weaker than last year’s as consumers worried about political paralysis in Washington pulled back, according to the National Retail Federation. The Washington-based trade group has said holiday sales will rise 4.1 percent to about $586.1 billion this year, compared with a 5.6 percent gain in 2011. Sales for November and December account for 20 percent to 40 percent of U.S. retailers’ annual revenue.

Nordstrom rose 3.1 percent to $55.27 at the close in New York. Gap, based in San Francisco, increased 2.3 percent to $32.09 at the close.

Target Corp. (TGT), the second-largest U.S. discount chain, posted December same-store sales that were little changed, compared with an estimate for a 1.3 percent increase. The Minneapolis-based retailer said earnings for the fourth quarter will meet or exceed the low end of its previous estimates.

Target rose 2.3 percent to $60.16 at the close in New York. The shares jumped 16 percent last year.

Kohl’s, Macy’s

Kohl’s Corp. (KSS), the third-largest U.S. department store chain, reported a 3.4 percent rise in same-store sales, compared with a average projection for a 1.3 percent gain. The retailer also cut its fourth-quarter earnings forecast to as much as $1.62 a share, from a maximum of $2.08 a share. Analysts surveyed by Bloomberg estimated $1.89, on average.

Kohl’s rose 0.3 percent to $42.35 at the close in New York.

Sales at Macy’s, the second-biggest U.S. department-store company, rose 4.1 percent, exceeding the average projection of 3.7 percent. The company also announced plans to close six stores in early spring this year, including one Bloomingdales location and five Macy’s stores.

Macy’s fell 2.2 percent to $37.47 at the close. The shares increased 21 percent last year.

Merchandise Miscalculations

Limited Brands Inc. (LTD), the operator of the Victoria’s Secret lingerie chain, reported comparable sales rose 3 percent last month, trailing projections for a 4.7 percent gain. January sales may increase in the “low single digits,” the company said in a statement.

Limited dropped 5.7 percent to $44.71 at the close in New York. The shares advanced 17 percent last year.

Some retailers also suffered from merchandise miscalculations. Target struggled to increase sales last month after poor results from a line of goods made in collaboration with luxury retailer Neiman Marcus Group Inc., Daniel Binder, an analyst for Jefferies Group Inc. in New York, wrote in a note to clients yesterday in which he downgraded Target shares to hold from buy. Sales also were hurt by being out of stock on several toys on its website, Binder said.

Target cut prices on the Neiman wares by designers including Tory Burch and Jason Wu by 50 percent before Christmas and then marked them down 70 percent after the holiday.

Most merchants tally same-store sales using locations open at least a year, making the figure a closely watched gauge of a retailer’s health because it looks only at established stores.

Most people are now looking at smaller paychecks after an increase in payroll taxes kicked in this month, and retailers face tough comparisons to the first part of last year, when consumers bought spring wardrobes early amid warm weather, Colin McGranahan, an analyst at Sanford C. Bernstein & Co. in New York, said in a telephone interview yesterday.

“It was a tough holiday season for a lot of reasons, and I think that’s going to continue into the first quarter,” he said.

To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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