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U.S. Retailers’ December Sales Fall Short of Estimates

December Retail Sales Damped by Snow as Some Miss Estimates
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

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.

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 1.6 percent to 500.96 at 4:19 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 $1.53 to $20.70 in New York Stock Exchange composite trading, while Minneapolis-based Target slumped $4.01 to $54.93, the biggest drop 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.”

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