This week, the world's top retailers will tell investors how the much-discussed holiday season went. Analysts expect a year-over-year gain of 1.3% for stores open at least a year, which of course uses a dismal 2008 as a benchmark.
The holiday shopping season is the last chance retailers get to pump up their financial statements before the close of their fiscal year, which usually comes at the end of January. For some retailers, up to 40% of their revenue comes in the weeks heading into Christmas.
Several retailers will be reporting same-store sales this week, including Costco (COST), Macy's (M) and Abercrombie & Fitch (ANF). If all goes as planned for December's results, retailers will report a fourth straight month of year-over-year gains. In 2008, same-store sales fell 3.6% from the prior year.
According to Richard Jaffe, an analyst at Stifel Nicolaus, "Santa did show up this year, delivered a lot of presents, and helped retailers become at least as profitable, and likely more profitable for everyone, than last year." His overall assessment is that "Things are going to be OK. Not great, but OK."
The preliminary results are varied. The International Council of Shopping Centers puts the annual gain at 2%, with the National Retail Federation calling it 1% in the other direction. The week's same-store sales results will be reported by the retailers themselves.
A Black Friday that failed to impress is now being viewed as a "false negative." Year-over-year sales were off 0.5%, which prompted many to worry about the outcome for the season as a whole. Deutsche Bank (DB) analyst Bill Dreher notes that an extra shopping day between Thanksgiving and Christmas helped, even though a snowstorm on the East Coast cost retailers a day of spending.
Dreher expects the results for the season to be up 1% to 2%, with market share gains benefiting Nordstrom (JWN), Kohl's (KSS) and Target (TGT). Discounters, including Target and BJ's Wholesale Club (BJS) are expected to post increases of 3.5%, according to Thomson Reuters. Teen apparel companies such as Aeropostale (ARO) are likely to be down around 4.5% from 2008.
Jaffe, for one, isn't worried about the retailers' results for the fourth quarter, citing well-planned promotions, tighter inventory management and lower expenses. He's more worried about what's in store for the spring, when retailers have to beat 2009's performance, rather than the lackluster numbers from 2008.
He maintains buy ratings on several retailers, including Gap (GPS), American Eagle Outfitters (AEO), TJX (TJX) and Urban Outfitters (URBN).
Closing Bell: Slow Growth Better Than No Growth (NYT, SLAB, V, MA, ZGEN, JASO)
InterDigital (IDCC): A Wireless 'Patent Machine'
Chasing Value: BP's Risk Manager Missing in Action
