US retailers post mixed December sales
Retailers posted mixed December sales results as many were forced to discount heavily to drive sales in the weekend prior to Christmas, in the hope of making up for weaker sales earlier in the month.
According to the International Council of Shopping Centres (ICSC), chain store operators posted a 4.5% increase, which was at the higher end of its expectations. However, this came on the back of a weaker November performance, when sales rose 1.7%.
"Despite the worry of the slow start to the holiday season, sales rebounded in December as consumers took advantage of more shopping days this year compared to last," said Michael Niemira, vice president of research and chief economist for the ICSC.
"That last-minute shopping, coupled with post-Christmas bargain hunting and early gift-card redemption helped propel sales at the end of the month."
Yet for Target, which recorded a below expectations 0.8% rise in December sales, strong results late in the month did not completely offset softness in the first three weeks.
Kevin Mansell, the chairman, president and CEO of department store chain Kohl's, which also recorded a lower than expected result, said: "Sales came late in the holiday season, and as a result, were at deeper discounts than planned. We are taking the necessary markdowns in the fourth quarter to manage our inventory as we transition into the spring season."
Last minute shopping wasn't the only issue faced by US retailers, with the fall out from Hurricane Sandy, above average temperatures, late storms, and the looming fiscal cliff tempering consumer spending. However, Perkins emphasised that despite these headwinds, December comparable sales were "not as bad as feared".
While Macy's recorded a 3.6% increase in total sales during December, chairman, president and CEO Terry Lundgren said the growth was "less than expected".
The weaker results have led to the company lowering its forecast for the quarter, now expecting same-store sales to rise 3-3.5%, down on prior predictions of them rising around 4.2%. The results, Lundgren said came "amid some significant headwinds from uncertain economic news and the lingering effects of Hurricane Sandy".
"The off-price retailers boosted guidance as they capitalised on customers trading down," said Bank of America Merrill Lynch analyst Lorraine Hutchinson in a note.
Stein Mart recorded a 6.4% increase in sales to reach US$176.5m, rising 5.9% on a comparable store basis. Its interim CEO Jay Stein said the results represent its "six consecutive month of positive sales" and it has been "more than seven years since we have experienced comp increases like this".
Meanwhile, TJX Companies CEO Carol Meyrowitz said the company's 6% comparable sales increase "significantly exceeded our expectations".
"Our December sales underscore that value remains top of mind for consumers and that our ability to offer extreme values during a promotional holiday selling season continues to be one of our key strengths," she said.
The highly promotional landscape over the month is likely to weigh on margins when retailers report their quarterly results.
"Increased promotion, two additional pre-Christmas shopping days during the month and strong e-commerce sales over Black Friday weekend that were booked in December helped to boost this month's results. However, the elevated promotional landscape of the month weighed on margins, particularly at Kohl's, where inventory levels were extremely high," emphasised Hutchinson.
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