NEW YORK – Despite softer sales from Wal-Mart Stores Inc., analysts say appropriate promotional levels and pent-up demand for gifts close to Christmas will result in solid December same-store sales across the retail sector.
Choice specialty retailers, such as Abercrombie & Fitch Co. and New York & Company Inc., are expected to be among the leaders of the pack when comparable-store sales results are released on Thursday.
Analysts are expecting an aggregate 3 to 4 percent increase in December comps. A report released last week from industry trade group International Council of Shopping Centers, for example, called for a “moderate” rise of 3 to 3.5 percent. The ICSC said procrastinating consumers and a later-than-usual Hanukkah helped boost sales the week before Dec. 25.
Goldman Sachs & Co. equity analyst Margaret Mager predicted that same-store sales in the specialty retail group will rise 3.3 percent in December. In a research note, the analyst said there were appropriate clearance levels in the channel as well as strong traffic levels at the mall the day after Christmas. She noted that handbags, denim and iPod cases were top sellers.
Mager said she also sees “mixed results in apparel as sweaters saw heavy markdowns.”
Elsewhere in the specialty sector, Joseph Teklits, senior analyst at Wachovia Capital Markets, sees robust December results, especially from Abercrombie & Fitch, Zumiez Inc. and New York & Co. “After a frenzy over the last eight or nine days of the month, we see the [December] results being a continuation of November’s second-best average gain of the year,” the analyst wrote in a recent report. In November, the aggregate same-store sales gain for Teklits specialty apparel index was 8.8 percent.
Teklits expects a 19 percent rise in December comps from Abercrombie & Fitch, and 10 percent gains at both Zumiez and New York & Co.
In the department store sector, analysts are bullish on December sales results from moderate chain Kohl’s Corp. and Nordstrom Inc.
But Wal-Mart said Saturday that combined same-store sales at its U.S. Wal-Mart and Sam’s Club stores advanced 2.2 percent in December on a preliminary basis. This compares with the retailer’s prior forecast of a 2 to 4 percent gain, and analysts’ consensus estimate for a 3 percent gain. Wal-Mart’s U.S. same-store sales in December 2004 rose 3 percent.
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Wal-Mart said in a statement that, during the last week of December, general merchandise sales were stronger than food sales. In prior months, food sales outpaced other categories at the world’s largest retailer. Citigroup equity analyst Deborah Weinswig partially attributed this trend reversal to the redemption of gift cards. Weinswig added in a recent research report that “Wal-Mart’s lack of an aggressive advertising campaign after Black Friday likely impacted traffic and ticket, as competitors were very promotional, which helped drive traffic.”