By Suzanne Kapner And Paul Ziobro
Retailers got the gift of better-than-expected sales this
holiday season.
About a dozen retailers have reported December sales so far, and
the results support the perception that the industry turned in a
solid performance in the crucial year-end period.
Sales excluding newly opened or closed locations came in higher
than Wall Street's modest expectations for growth, a sign that
sharply lower gasoline prices, declining joblessness and a stronger
economy are spurring consumers to spend more, a trend that could
continue into 2015, analysts said.
The stronger sales led nearly half of the retailers that
reported results on Thursday to raise their financial forecasts for
the current quarter, including American Eagle Outfitters Inc. and
Aéropostale Inc., teen retailers that have been struggling to
reinvent themselves. None of the retailers lowered their forecasts,
according to Retail Metrics.
December sales excluding newly opened or closed stores rose 5%,
more than the 3.9% that Retail Metrics had forecast. Even though
much of that growth came from the strong performance of drugstores
Rite Aid and Walgreen's, all but two chains did better than
expected for the period, according to Ken Perkins, a Retail Metrics
research analyst. The exceptions were Coscto Wholesale Corp., which
sells gasoline and has been hurt by falling prices, and Fred's, a
dollar store that has been struggling for several quarters.
Family Dollar said profit for the three months ended Nov. 29
fell 46%. Sales at established stores fell 0.4% because shoppers
mainly came in to buy staples like groceries and tobacco, both of
which have thin profit margins. But the retailer said sales and
traffic rebounded in December, culminating in a rush of customers
on Christmas Eve, the busiest single day in company's 55-year
history. Same-store sales rose 1.2% in December while traffic
increased more than 2%, the strongest in more than two years, Chief
Executive Howard Levine said.
The upbeat early read on holiday sales is in contrast to last
year, when sales fell short at many retailers, forcing them to
lower their financial guidance and leaving them awash in unsold
goods.
Some of the sales gains this year came at the expense of margins
as a result of heavy discounting that started early in the
season.
"This year's holiday environment in the fashion apparel industry
was more promotional than any I can recall," said Richard Hayne,
the chief executive of Urban Outfitters Inc.
Still, several retailers said traffic improved. Others, such as
Aéropostale and L Brands Inc., which owns Victoria's Secret, said
they finished the period with lean inventories, setting them up for
a fresh start to the year.
The news follows results from J.C. Penney Co. earlier in the
week, which said sales rose 3.7% in the nine weeks through the end
of December. That compared with 3.1% growth for the same period a
year ago, a result that sent the struggling department store
chain's shares soaring.
Many of the companies are still facing serious challenges as
they try to adapt to a world where shoppers are buying more online
and browsing less in stores. Penney, for instance, is trying to
reinvent itself after a failed overhaul that eliminated discounts
and popular house brands turned off shoppers. And teen retailers
have been struggling to stay relevant as their customers move away
from logos to more individualized styles sold at cheaper
fast-fashion chains.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Paul
Ziobro at Paul.Ziobro@wsj.com
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