NEW YORK — Consumers displayed a penchant for penny-pinching this holiday season, as the nation’s retailers Thursday reported same-store sale results for December that were disappointing enough to lead several firms to shave their fourth-quarter earnings expectations.

Still, retail observers breathed a sigh of relief that results weren’t even more anemic, and investors, who sent the Dow Jones Industrial Average up 180.87 points, or 2.1 percent, to 8,776.18, propelled the Standard & Poor’s retail index even further as it advanced 3.6 percent to 273.67.

This story first appeared in the January 10, 2003 issue of WWD. Subscribe Today.

Writing in a research note that she had expected a “Thriftmas,” Salomon Smith Barney analyst Deborah Weinswig said, “Our take is things could have been worse, given consumer pressures that range from potential war to high levels of debt.”

Steve Skinner, a partner in the retail industry group at Accenture, noted, “I never thought this Christmas was going to be very positive, but most of the results are in line.”

Todd Slater, analyst at Lazard Freres, said, “It has been a hellish roller coaster ride for retailers, but it was not a ‘Nightmare on Elm Street.’”

However, Dana Cohen, an analyst with Banc of America Securities, pointed out that, while the results were slightly better than anticipated, plans and expectations were reduced throughout the quarter. “The numbers were so depressed that we are getting a bounce,” Cohen said.

Like out-the-door prices and inventory levels, expectations had dropped throughout the holiday season, especially after November’s poor results. However, consumers opened up their wallets a bit late in December, allowing many stores to meet or even beat their modest plans. Even discounters, stellar performers in the poorly received retail melodrama of 2002, had problems making their plans, as discounting was endemic to all retail sectors. With a sea of sameness compounding a paucity of marketable fashion items, department and specialty stores were also denied the holiday cheer for which they’d hoped.

Overall, the Goldman Sachs comp index for December rose a paltry 1 percent, below its 1.8 percent estimate. Discount stores improved 2.3 percent, better than the 2.1 percent expectation but well below the 5.7 percent increase in 2001. Specialty stores escaped with a 0.9 percent increase, less than one-third the 2.8 percent estimate but better than December 2001’s 3.6 percent decrease. Department stores were weakest, falling 2.1 percent against expectations of a 0.5 percent increase but better than last year’s 3.6 percent slump.

Upside surprises in December included J.C. Penney, up 4.7 percent, and Gap, up 5 percent. While Limited Brands and Abercrombie & Fitch both beat plan with flat performance and Bebe Stores exceeded forecast with a 5 percent decline, Pacific Sunwear, Hot Topic, Chico’s FAS and Cache were among those toasting in the new year with double-digit gains.

With expectations extremely guarded, stocks constrained and margins insulated, more stores maintained or raised fourth-quarter profit outlooks than lowered them. Some hope to realize a bit of a new year’s bounce from business done with their gift cards, which aren’t recognized as revenue until redemption.


December specialty store comps were mixed from both a comp and margin perspective, but there was some upside against very reduced expectations. Gap Inc. managed its third consecutive comp gain, after 30 months of declines, logging a 5 percent increase last month. Reclaiming the mantle of industry outperformer, the San Francisco-based apparel retailing heavyweight declared its overall December sales and merchandise margins exceeded its beginning-of-month projections, unlike the majority of the industry. Comps increased at all divisions: Old Navy, 9 percent; Banana Republic, 4 percent, and Gap, 2 percent.

Heidi Kunz, chief financial officer, commented: “We offered customers better balanced and brand-appropriate product assortments supported by more focused marketing and promotions.”

At Gap, the popularity of accessories and outerwear led to higher conversion rates and units per transaction. Old Navy also experienced an increase in conversion rates as well as significantly improved average unit retail.

On the other hand, The Limited Brands missed its plan and reported flat comps and merchandise margins. The Victoria’s Secret brand delivered strong holiday results, offset by key category misses at Express and Bath & Body Works. Only VS comps, up 5 percent, were above plan, driven by a strong post-Christmas performance in both its bra sale and the first few days of the semiannual sale. B&BW comps were on par with last year’s, while Express, which had additional markdowns and increased promotional activity, saw comps fall 7 percent as those for Limited stores declined 4 percent. The company said it expects January comps to be flat and margins to be down significantly as it has more seasonal merchandise to clear compared with last year.

Echoing results released Wednesday by Hot Topic, Pacific Sunwear of California Inc. said its comps increased 16.1 percent, with PacSun up 15 percent and Demo up 25.8 percent. PacSun now projects fourth-quarter comps will be up 13 percent, assuming comps will be up 6 to 8 percent this month, and accordingly boosted earnings per share guidance to 43 cents versus the 37 cents analysts were expecting.

The rest of the specialty sector was mixed. Chico’s FAS turned in a 12.6 percent increase, but Ann Taylor and Talbots reported declines of 14.6 and 9.6 percent, respectively, and the latter reduced fourth-quarter earnings guidance to 42 to 47 cents from 48 to 53 cents.

Among the teen stores, Abercrombie & Fitch comps were flat, but it raised EPS guidance to a range of between 86 and 88 cents from 79 cents due to December’s better-than-expected sales and margins. Wet Seal was down 19.4 percent and warned on the current quarter, while Gadzooks, which announced its withdrawal from men’s wear retailing, was down 2.4 percent.


Federated Department Stores’ same-store sales dropped 2.6 percent for the month. The parent of Macy’s and Bloomingdale’s, among others, said fourth-quarter profits would come in at the low end of its plan for $1.95 to $2.05 a share, excluding the impact of potential yearend store closings.

May Department Store Co., parent of Lord & Taylor and Hecht’s, among others, reported a 4.7 percent comp decrease for the month.

Kohl’s Corp., the usually robust discount-department store hybrid, said same-store sales rose 3.3 percent. “With a compressed selling season, we had expected much stronger comparable-store sales in December,” admitted chief executive Larry Montgomery, in a statement. “Going into the new year, we will continue to be aggressive in our marketing and we are well positioned to continue to increase market share.”

Kohl’s now is looking for its fourth-quarter profits to be at the lower end of its previous guidance and Wall Street expectations of 79 to 84 cents a share.

Sears, Roebuck & Co.’s December comps slid 4.6 percent in its domestic doors. Also on Thursday, Fitch Ratings lowered its senior unsecured debt ratings for Sears and some of its related businesses to “BBB-plus” from “A-minus,” and removed the firm from rating watch negative. At the same time, Fitch has affirmed Sears Roebuck Acceptance Corp.’s commercial paper rating at “F2” with a negative outlook.

J.C. Penney Co. Inc.’s department stores comped up 4.7 percent for the month. All of the firm’s merchandise categories showed positive same-store results with particular strength in children’s, fine jewelry and home. Combined, November and December produced a 3 percent comp rise.

Comps at Dillard’s Inc. sank 4 percent. Same-store sales at Saks Inc.’s department stores slid 1.6 percent, while the firm’s luxury Saks Fifth Avenue unit dipped 3 percent. Fourth-quarter earnings at Saks, before certain items, are projected to be about flat with the year-ago take of 50 cents a share, before certain items, with operating margin improvement offsetting sales declines.

Neiman Marcus Group’s comps fell 2.8 percent. Nordstrom Inc. managed a 3.4 percent comp uptick for the month.

Regional department stores with shrinking comparable-store sales last month included Elder-Beerman Stores Corp. (down 1.6 percent), Gottschalks Inc. (1.6 percent) and Stage Stores Inc. (5.8 percent). York, Pa.-based Bon-Ton Stores Inc. managed to buck the trend with a 1.3 percent comp increase for December.


When Wal-Mart Stores misses its initial sales plan, there’s little doubt that it was a tough holiday season.

The Bentonville, Ark.-based giant crossed the December same-store sales finish line with a 2.3 percent increase in its U.S. operations. At the beginning of the month, the firm had been looking for a 3 to 5 percent uptick, a projection later lowered to the 2 to 3 percent range ultimately attained.

Wal-Mart’s discount stores posted a 3.3 percent comp uptick, while comps at Sam’s Club fell 2.8 percent. “The holiday season started out slow and then picked up the weekend prior to Christmas,” said a spokeswoman on a recorded call. “The streak continued for several days following the holiday and then leveled off.” She also noted that inventories, while slightly higher than the firm would like, were manageable.

For January, the company is looking for a 3 to 5 percent comp increase at its flagship division and a slightly milder 2 to 4 percent rise for its overall U.S. retail operations.

Target Corp. also had a tough time in December. The firm’s overall same-store sales slid 0.3 percent and were “well below plan.” The Target division comped up 1 percent, but was initially projected to rise 3 to 5 percent. Mervyn’s and Marshall Field’s comps slid 8.2 and 5.2 percent, respectively.

“For the fourth quarter, we expect the impact of this sales shortfall on earnings to be at least partially offset by continued strength in our gross margin rate performance and substantial growth in contribution from our credit card operations,” said Bob Ulrich, chairman and chief executive, in a statement.

TJX Cos. managed a 1 percent comp increase for the month. Ross Stores posted a 6 percent same-store sales increase in December and said the better-than-expected sales over the past two months will add about 3 cents a share to its fourth-quarter earnings per share. The firm is now looking for EPS of about 74 cents for the quarter, up from 62 cents in the year-ago period.

ShopKo Stores comps slid 0.2 percent.

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