November sales to shed light on holiday start
Written on December 2, 2009
When U.S. retail chains report November sales this week, investors will learn whether they have gone far enough to protect profits against a weak start to the holiday shopping season.
Early data on weekend shopping from U.S. Thanksgiving Day on Thursday through Sunday showed a slight increase in retail sales, pressuring shares from Wal-Mart Stores Inc to J.C. Penney Co Inc and Saks Inc.
To get a clearer picture of how holiday sales are faring, analysts said they are waiting for retailers to release their own sales figures on Wednesday and Thursday.
“This November, (same-store) sales are going to be incredibly important to gauge the state of consumer spending, and thus fourth-quarter earnings and stock trajectory, and it’s also an important statement about the economic recovery,” said Deutsche Bank analyst Bill Dreher.
Last November, same-stores sales fell 7.8 percent, the worst decline since Thomson Reuters began tracking such figures in 2000. Shoppers, panicked by a financial crisis that wiped out retirement accounts and credit limits, slammed shut their wallets. Retailers were forced to slash prices, undermining profits in the year-end fourth quarter.
This year, analysts got more bullish on prospects for November as customer traffic picked up closer to Thanksgiving Day on November 26, according to Jharonne Martis, director of consumer research for Thomson Reuters.
Ahead of Black Friday, the day after Thanksgiving when retailers offer eye-popping deals, November same-store sales were expected to rise 1.8 percent.
By Friday, Wall Street had become more bullish and analysts polled by Thomson Reuters expected same-store sales to rise 2.5 percent. But with early data from the weekend now trickling in, estimates have moderated. November same-store sales are now forecast to rise 2.3 percent, according to Thomson Reuters.
The International Council of Shopping Centers has also tempered its view. On Tuesday it forecast November same-store sales would show a rise of 3 percent to 4 percent — down from its view last week that sales would rise 4 percent to 6 percent. It sees more holiday shopping shifting into December.
The ICSC said electronics and online sales were the big winners at the start of the holiday shopping season.
But while many large retailers including Costco Wholesale Corp, Target Corp and Kohl’s Corp will release sales figures on Thursday, the data will lack results from key holiday retailers — including Wal-Mart, Best Buy Co Inc and Amazon.com Inc.
SEEKING CLARITY ON THE TOP LINE
Data released over the weekend pointed to a muted sales start for the holidays. ShopperTrak said sales rose 0.5 percent on Black Friday. The National Retail Federation, the trade group for the retail industry, said customer traffic hit record levels, but consumers spent nearly 8 percent less on average on deals like $3 coffeemakers at Target or $10 toys at Walmart.
The traffic surge was welcomed by retailers.
“With November starting off slow, the month’s sales results have grown increasingly dependent on Black Friday (and Saturday),” wrote Credit Suisse analyst Michael Exstein, in a note on Monday. “A recovery toward the end of the month is not an unlikely scenario given retailers’ aggressive marketing campaigns.”
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