Unresponsive consumers combined with an uncooperative calendar to leave retailers with December sales that fell below estimates and further pressured their fourth-quarter profits.
Thomson Reuters put the median increase for firm’s reporting December results Thursday at 2.4 percent, excluding drug stores, slightly better than the 1.9 percent median increase expected. Yet, every apparel retailer on the list missed the consensus estimate of analysts. The “misses” by the two teen retailers on the list, Zumiez Inc., down 2.4 percent versus a projected 1.6 percent gain, and The Buckle Inc., down 2.8 percent versus a projected 0.9 percent gain, were among the largest.
The compressed seasonal calendar and widespread inclement weather during the month left them with fewer days to make their seasonal sales and many failed to reach either their goals or Wall Street’s expectations. Widespread promotions helped to ease inventory pressures but exacted a heavy toll on the bottom line, with a number of stores, including L Brands Inc. and Zumiez, bringing down profit expectations for the final quarter of most retailers’ fiscal years.
L Brands, expected by analysts polled by Thomson Reuters to post a 3.7 percent increase in comparable sales last month, instead reported a 2 percent increase, with Victoria’s Secret, expected to comp up 3.7 percent, was up 2 percent. The Columbus, Ohio-based retailer now expects fourth-quarter profits of about $1.60 a diluted share versus prior estimates for EPS of between $1.67 and $1.82.
Zumiez, reporting late Wednesday ahead of the remaining stores still disclosing comps on a monthly basis, now anticipates fourth-quarter EPS of between 56 and 59 cents, versus a previous guidance range of between 60 and 66 cents. The company cited “lower than planned quarter to date, and to a lesser extent lower than planned merchandise margins” in its profit warning.
Gap Inc. also missed estimates. Corporate comps for December, expected to rise 1.5 percent, were flat, with Gap brand up 1 percent, Old Navy down 2 percent and Banana Republic flat, and net sales for the five-week period ended Jan. 4 were down to $2.05 billion from $2.08 billion in the comparable year-ago period. For the nine-week November-December period, comps rose 1 percent.
Still, Gap said it remains “comfortable” with earlier full-year earnings guidance of between $2.57 and $2.65 a diluted share, implying fourth-quarter EPS of between 50 and 58 cents.
Comparable sales declined 6 percent at American Apparel Inc. with a 7 percent same-store decline and a 2 percent drop in online sales. Dov Charney, chairman and chief executive officer, noted calendar issues and the company’s double-digit comp in 2012. “It is also noteworthy that our sales improved towards the end of the month — the last week of the month comparable store sales were only down 1.7 percent – as opposed to the beginning of the month, when we felt our consumer was ‘shopped out’ as a result of Black Friday,” he said.
Costco Wholesale Corp. beat estimates with a 5 percent comp increase at its U.S. stores, excluding fuel, and Stein Mart Inc.’s 4.5 percent comp increase was a full point ahead of consensus estimates. Stein Mart said dresses and ladies’ boutique were among its strongest categories while jewelry and men’s sportswear were “more challenged.”
Urban Outfitters Inc. provided a seasonal update for investors and noted its overall comps were up 3 percent during the November-December period. Anthropologie was up 11 percent during the two-month period and Free People ahead 21 percent while the namesake brand was down 6 percent.
Similarly, American Eagle Outfitters Inc. said its comps were down 7 percent during the November-December period and that fourth-quarter EPS would be at the low end of its earlier guidance of between 26 and 30 cents.
Robert Hanson, ceo, commented, “Following a solid Thanksgiving weekend, traffic and sales through Christmas week were on the low end of our expectations and the retail environment was highly promotional, pressuring margins and EPS. Our post-Christmas clearance event is meeting our expectations and we expect to end the year with inventories on plan. We are intensely focused on making fundamental improvements to our business as we adapt to a fast-changing retail landscape.”
Urban Outfitters and American Eagle Outfitters are among the large number of retailers who have ceased reporting sales on a monthly basis in recent years.
Cato Corp.’s comps were down 4 percent.