A Preview to Holiday Retail - Analyst Blog
November 28 2011 - 5:45AM
Zacks
The National Retail Federation
(“NRF”), an industry trade group, projects a 2.8% growth in sales,
amounting to $465.6 billion, during the current November to
December holiday season, lower than the 5.2% rise in the
corresponding period of the previous year. Online retail may
increase 15% to touch $37.6 billion. These estimates reveal a
rebound in consumer expenditure, which amounts to about 70% of the
U.S. economy.
Brick-and-mortar retailers ran
extended hours post Thanksgiving in order to snatch some business
from Internet retailers who continue to grow at a brisk pace. The
growth trajectory of online sellers remains intact despite huge
destruction of consumer wealth during the financial crisis in 2008
and tepid recovery since then.
On the other hand, retail icons for
middle-class shoppers, J. C. Penney
Company (JCP) and Sears (SHLD),
struggle to lure customers even with plenty of loss leaders. At the
same time, many stores at both ends of the brand spectrum, discount
and up-market retail outfits, are witnessing brisk business.
In line with its performance in the
past three years, the behemoth of online retailing,
Amazon.com (AMZN) continued to grow sales at a
scorching pace in the third quarter. However, its future earnings
will be dampened by investments in a higher number of fulfillment
centers.
Macy’s (M) latest
quarterly earnings handily beat the Zacks Consensus Estimate partly
buoyed by robust online sales (at macys.com, bloomingdales.com),
which were up 39.8% in the most recent quarter. Reflecting its
renewed optimism, the company recently raised its 2011 earnings per
share to a higher range of $2.70 to $2.75 from $2.60 to $2.65
earlier.
Among the middle-of-the-road
retailers, Sears reported a higher-than-expected adjusted loss for
the reported quarter on lower-than-anticipated sales. J.C. Penney
recently stated mixed results with a year-over-year drop in
both earnings and revenues.
These, traditional retail bastions
have experienced scant growth in sales over the past 3 years and
often provided negative returns to their shareholders.
Wal-Mart (WMT) lately reported an in-line earnings
quarter on higher-than-expected sales; yet this bellwether of the
American economy has mostly failed to beat the equity market over
the last couple of years.
Nordstrom (JWN),
which provides a quintessential up-market shopping experience,
continues to do well with forecast-beating earnings per share on
surging sales, in the latest quarter. Consequently, the company has
lifted its earnings guidance for the current fiscal year. Other
boutiques that fared well, include Coach (COH) and
Limited Brands (LTD), which also recently improved
their earnings outlook for the on-going financial year.
In congruence with robust past
performance, deep discount chains, such as Dollar
General Corporation (DG), the largest
retailer in the country, and Family Dollar Stores
(FDO), are expected to continue to do well this Holiday Season and
beyond. Bed Bath & Beyond (BBBY), which
operates specialty retail stores with “everyday low prices”
reported 10 straight quarters of improving trend and its earnings
per share rose 33% year over year in the most up-to-date quarter.
Big Lots (BIG), with its close-out format for
discount retail, issued slightly higher earnings guidance on
flattish (to slightly down) same-store sales for fiscal
2011.
Retailers have by and large put in
a middle-of-the road performance since the financial crisis in
2008. The outlook though not very encouraging because of stubbornly
high unemployment levels and deleveraging efforts of the average
American consumer, looks positive for high-end and deep discount
retail.
AMAZON.COM INC (AMZN): Free Stock Analysis Report
BED BATH&BEYOND (BBBY): Free Stock Analysis Report
BIG LOTS INC (BIG): Free Stock Analysis Report
COACH INC (COH): Free Stock Analysis Report
DOLLAR GENERAL (DG): Free Stock Analysis Report
FAMILY DOLLAR (FDO): Free Stock Analysis Report
PENNEY (JC) INC (JCP): Free Stock Analysis Report
NORDSTROM INC (JWN): Free Stock Analysis Report
LIMITED BRANDS (LTD): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
SEARS HLDG CP (SHLD): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
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