By  on January 26, 2005

NEW YORK — Retailers’ fourth-quarter sales and earnings season kicks off Thursday and the sector isn’t sitting as pretty as it did a year ago.

Although the 2004 holiday spending season has been called “the best in years” by several industry groups, equity analysts don’t anticipate across-the-board, stellar results. A few major retailers, including Target Corp. and Kohl’s Corp., have already warned Wall Street not to set expectations too high.

Eric Beder, senior equity analyst at J.B. Hanauer & Co., said the latest retail earnings season has three clear themes: “Luxury is going to rule. They’re going to beat the numbers significantly, which you’ve already seen with Coach. Discounters are going to be a tale of woe in terms of upside to earnings and outlook going forward. And for the specialty retailers, the key to determining earnings is whether they had something unique and differentiated.”

Regarding the reign of luxury retailers, Beder, echoing many analysts, said that this fall will be “the next major test” of the trend’s staying power. For now, though, investors are fixed on bottom-line results for the fourth quarter of 2004, and where gross margin rates trend over the next two quarters.

There’s more than enough to be worried about.

Over the past month, Target and Kohl’s told Wall Street that fourth-quarter earnings would come in lower than forecast. But that doesn’t mean results will be all doom and gloom. Through the holiday shopping season, retailers such as Neiman Marcus Group and American Eagle Outfitters Inc. posted robust same-store sales, and are likely to be among the winners of the holiday race.

Sears, Roebuck & Co. is on deck to report fourth-quarter results on Thursday. Wall Street’s optimism about the retailer, which is being acquired by Kmart Holding Corp., wilted months ago after Sears’ third-quarter conference call on Oct. 21.

The firm projected fourth-quarter domestic comps would be flat compared with the previous year, including a low- to mid-single-digit decrease in apparel comps. Sears, which struggled with apparel merchandising problems for much of the year, also said it projects that gross margins in the quarter will be down from last year’s 28.9 percent. In December, Sears said same-store sales fell 3 percent, while year-to-date comps are down 1.7 percent.

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