NEW YORK – A shopping spree before and after Christmas helped many of the nation’s retailers meet their holiday sales goals, but heavy discounting to lure customers into stores came at the expense of profits, Wall Street analysts say.
“Overall, it was a marginally disappointing holiday in terms of profits, but it wasn’t a disaster because you had a big surge in post-holiday traffic,” said John Morris, an analyst at Harris Nesbitt, an investment firm. “It was a holiday season marked by a stingier consumer who wanted to wait until the last minute for the markdowns.”
Morris noted that gift card redemptions and people buying items for themselves, though at reduced prices, helped boost holiday sales. Gift cards are only recorded as sales when they are redeemed.
Ken Perkins, an analyst at RetailMetrics LLC, a research firm in Swampscott, Mass., said the retail industry will probably see the weakest profit gain for the year in the fourth quarter, which for retailers is over at the end of January.
Based on 138 retailers he follows, the retail industry is averaging profit growth of 8.9 percent for the fourth quarter, versus the year-ago period when it averaged 14.7 percent. This year’s figure is down from 10.2 percent right before Thanksgiving. But Perkins believes it could slip into the 7 percent range after retailers report December sales figures on Thursday.
The sales figures are based on same-store sales, or sales at stores open at least a year, and are considered the best measure of a retailer’s health.
The International Council of Shopping Centers reported Tuesday that same-store sales rose 4.6 percent for the week ended Jan. 1, over a year ago. That was the strongest gain since June 19, when the increase was 4.9 percent. Same-store sales rose 0.2 percent from the prior week.
ShopperTrak, which tracks total sales at more than 40,000 retail outlets, said total sales for the week ended Jan. 1 rose 55.6 percent compared with the same period a year ago.
Michael Niemira, chief economist at the International Council of Shopping Centers, said the performance over the last two weeks “was a pleasant surprise to an uncertain and uneven season.”
The late sales surge is expected to put merchants on track for a projected same-store sales gain of 3.0 percent to 3.5 percent in December from the year-ago period, he said.
Most Wall Street analysts have not yet revised their fourth-quarter earnings figures for retailers and are awaiting December’s same-store sales reports.
Profits at stores that cut prices most aggressively – including AnnTaylor Stores Corp., Limited Brands Inc.’s Express and Gap Inc., or department stores such as Bon-Macy’s. and Sears, Roebuck and Co. – are expected to be hardest hit, according to analysts.
In a research note, Todd Slater, an analyst at Lazard Freres &Co., expects department stores to show same-store sales declines in December, after posting gains for two months in a row.
The exceptions will be luxury chains including Neiman Marcus Group Inc. and Seattle-based Nordstrom Inc., which have continued to enjoy robust sales as their well-heeled customers have benefited from the economy’s recovery.
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