The Grinch was denied in December — and retailers gladly accepted consumers’ gift of a markedly brighter earnings outlook for the fourth quarter.
Neither economic anxiety, high unemployment, low consumer confidence nor a weekend snowstorm were able to keep consumers from working off some of their pent-up demand and making their appointed shopping rounds last month, leaving retailers with better-than-expected same-store sales results, higher margins, lower inventories and, in many cases, improved earnings expectations. The results stood in sharp contrast to the dismal numbers of December 2008, which were marked by widespread declines, deep discounts and consequent low margins and excess inventory.
But no one is quite ready to celebrate just yet, cautioning their outlook for 2010 remains guarded.
Many companies reporting December comparable-store sales Thursday beat their own internal expectations, which led to a slew of upgraded fourth-quarter earnings guidance from retailers including Macy’s Inc., Kohl’s Corp., Nordstrom Inc., Limited Brands Inc., Aéropostale Inc., Destination Maternity Corp. and, in the red-hot off-price channel, The TJX Cos. Inc. and Ross Stores Inc. Others, such as Sears Holdings Corp., said they would top analysts’ estimates.
While TJX and Ross generated the largest increases for the month — 14 and 12 percent, respectively — December was especially kind to upscale department stores, which were battered especially hard by the recession. Easier comparisons and over a year of adaptation to the tougher consumer landscape helped Saks Inc., Nordstrom Inc. and Neiman Marcus Inc. reverse prior declines and post increases of 9.9 percent, 7.4 percent and 4.9 percent, respectively.
Macy’s cited a strong performance at its upmarket Bloomingdale’s unit in reporting a 1 percent increase for the month, aided by a 29.4 percent leap in online sales, and lifting its fourth-quarter guidance to a range of $1.14 to $1.18, excluding special items, from its previous outlook of $1 to $1.05. “Gifts and designer brands” were instrumental in Bloomingdale’s success, the company said.
“We had a consistently positive month except for the weekend of the snowstorm, which was very tough on us considering our concentration in the markets where the storm hit, in the Midwest, mid-Atlantic and Northeast,” Terry Lundgren, Macy’s chairman, president and chief executive officer, told WWD.
Looking forward, the Macy’s ceo cautioned that “all of those underlying issues that impact the consumer are still there for 2010,” and cited the nation’s high unemployment, tight credit and deflated home values.
Still, Lundgren said he was “encouraged” by recent trends. “I believe we can take market share,” he said. “Comps are going to become easier, particularly in the first half of 2010, but the consumer has more clarity today than in over a year, in terms of their jobs, their financial status and their credit situation. I think the consumer is significantly more positive than a year ago. The overall situation is easier to read. I’m not saying it looks great, but we can plan for it better than we did in the past.”
Nineteen of the 33 retailers tracked by WWD posted gains, making last month the first since May 2008 that more retailers finished the month with increases than decreases. In December 2008, WWD’s tally was dominated by 28 declines to go with seven increases and three companies that were flat.
While stores have been able to limit the damage to their bottom lines by cutting expenses and inventories, they’ve had little in the way of pleasant top-line surprises since the credit markets went into a tailspin in September 2008.
"I was driving back on Saturday afternoon from the beach, and I just saw this sign saying 'Skydiving for $95.' And I was like, I can't not sky dive for $95," says Tom Bateman about a moment in Hawaii while shooting "Snatched." #wwdeye (📷: @vsteves; Interview by @ktauer; Styled by @thealexbadia)