By Lauren Pollock And Michael Calia
The gift of lower gasoline prices helped U.S. retailers post
stronger-than-expected sales over the holiday-shopping season as
consumers were more inclined to open their wallets to take
advantage of promotions at the mall.
Retailers have been battling steep and persistent drops in store
traffic as shoppers make more purchases online. That decline has
prompted chains to slow store openings and forced a few apparel
retailers to close their doors in recent months.
The stronger holiday sales won't necessarily translate into
higher earnings, though, as promotions and other efforts to clear
inventory threaten to dent the companies' bottom lines.
Urban Outfitters Inc. Chief Executive Richard Hayne said
Thursday that "this year's holiday environment in the fashion
apparel industry was more promotional than any I can recall."
Many retailers, including the major department stores and most
big-box retailers, stopped reporting monthly metrics some time ago,
making it difficult to gain perspective about the entire industry.
However, on Thursday, more chains than usual reported their holiday
sales, many to tout strong results.
Among the standouts that reported Thursday were Costco Wholesale
Corp. and L Brands Inc.
Costco, which sells groceries and other items in bulk, is also
one of the largest fuel retailers in the U.S. The company posted an
8% increase in sales, excluding gasoline, in December, topping
estimates of 7.1% growth. However, it indicated lower gasoline
prices knocked its sales growth in the U.S. by three percentage
points.
L Brands posted a stronger-than-expected 4% increase in sales
for December, but the operator of Victoria's Secret and Bath &
Body Works offered a somewhat cautious outlook for January that
sent its shares slightly lower.
Family Dollar Stores Inc., another retailer thought to benefit
from low gas prices, said its December sales at existing locations
rose 1.2% as customer traffic grew despite fewer markdowns from
seasonal promotions. Family Dollar's core customers are typically
low-income shoppers who are particularly sensitive to fluctuating
prices at the pump.
Auto club AAA has estimated the average U.S. household saved
$115 on gasoline last year, mostly in the year's final months as
crude oil prices dropped about 50% from their summer highs.
In all, the Thomson Reuters sales index indicated retail sales
rose 5.1% in December, excluding newly opened and closed stores.
Factoring in Gap Inc., which is expected to report after the market
close, Thomson Reuters had projected the 10 retailers it tracks to
post 3.8% growth.
Even the long-struggling teen apparel sector reported widespread
sales growth.
American Eagle Outfitters Inc. and Aéropostale Inc. boosted
their bottom-line guidance for the current quarter, and Urban
Outfitters said it posted record sales for the holiday-shopping
season, with each of its brands delivering positive
comparisons.
Trendy apparel chains Zumiez Inc. and Pacific Sunwear Inc. also
outperformed expectations.
The relatively positive news from some teen retailers comes at
an otherwise dire time for the sector. Wet Seal Inc. said Wednesday
that it would close two-thirds of its stores and lay off 3,695
employees. Catalog retailer Delia's Inc., meanwhile, filed for
Chapter 11 protection last month, and Deb Shops has moved to
liquidate its merchandise.
Elsewhere, Signet Jewelers Ltd., the operator of Zale, Sterling
Jewelers and its namesake locations, said sales rose across all of
its divisions over the eight-week holiday period. It pointed to its
merchandise assortment and resistance to deep promotions.
But long-struggling Barnes & Noble Inc. said Nook sales
plunged 55% in the holiday season, hurt by lower sales of devices
and accessories, as well as digital content.
Regional discount merchandise chain Fred's Inc. also
disappointed. Though Chief Executive Jerry Shore said the pharmacy
department continued to do well, Fred's sales of general
merchandise were hurt by declining traffic, which the retailer
blamed on aggressive marketing programs by competitors.
Other pharmacy companies including Walgreen Boots Alliance Inc.
and Rite Aid Corp. also posted strong results in recent days,
benefiting from an early start to the flu season.
And J.C. Penney Co. became the first of the big department-store
retailers to weigh in, reporting earlier this week a 3.7% increase
in sales for the nine-week holiday period, an indication its
turnaround efforts are paying off.
Write to Lauren Pollock at lauren.pollock@wsj.com and Michael
Calia at michael.calia@wsj.com
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