New York, NY, Dec. 1--November retail sales are expected to show only moderate gains from last year's poor results as recent warm weather hurt sales of winter gear, and some shoppers hesitated amid a lack of holiday bargains.
Due on Thursday to report November sales at stores open at least a year, U.S. retailers will post results that do show an improved consumer mood, experts say. Buoyed by this year's stock-market rally and a recent round of tax cuts, November same-store sales at major chains will post a collective increase of 4.6%, according to an estimate by Lazard analyst Todd Slater. In the year earlier November, same-store sales in Lazard's index of 50 major retail chains fell 1%.
The latest sales forecasts are in line with most companies' original plans, and show that they are on track to meet or exceed consensus estimates for fourth-quarter earnings, Slater said. This past weekend, the post-Thanksgiving shopping season was off to "a strong start," according to ShopperTrak. The Chicago research firm recorded a 5.4% increase in total sales nationwide on Friday and Saturday combined.
Various forecasts have predicted holiday sales will rise anywhere from 3.5% to 7%. If November numbers lag the high-ball estimates, most analysts say they expect shoppers to crank up their spending in December.
Still, some analysts see increasing reasons to doubt that this will be a blowout season. Wal-Mart Stores Inc. said its sales on "Black Friday" rose 6.3% to $1.52 billion, a single-day record. That increase fell well short of the 14% year-over-year gain it posted on the year-earlier day, notes Bill Dreher, an analyst at Deutsche Bank Securities Inc. in New York.
"The consumer remains cautious and is disinclined to spend exuberantly," Dreher wrote in a Monday research note. "As such, we believe seasonal and discretionary sales were limited throughout the month and expect the majority of the (same-store sales) increases to be driven by the easier comparisons."
Cost-conscious consumers continue to flock to low-priced venues like Wal-Mart. Dreher expects the Bentonville, AR, behemoth's November same-store sales will increase 4%, in line with the company's plan for a 3% to 5% increase. Wal-Mart's same-store sales increased 2.6% a year earlier.
Comparable sales at Target Corporation's discount stores, however, have been running ahead of the company's 3% to 5% growth plan for November, and will likely outpace Wal-Mart's to rise 5.2%, Dreher estimated. In addition to an easier year-over-year comparison, Target's comparable sales are benefiting from "a higher-income clientele that is more resistant to a liquidity crisis," Dreher says.
Lazard's Slater estimates discount chains will lead the industry with a collective same-store sales increase of 6% in November, compared with a 1% increase a year earlier. Apparel retailers are seen lagging those results as usual. Slater anticipates that same-store sales at specialty-apparel chains will increase by 3.6%, compared with 1.1% last year. Department stores will post a mere 1.7% gain, Slater forecasts, far from adequate to counter the 6.4% decline they saw the previous November, according to Lazard.
Better performers in the mall of late include Gap Inc., which Merrill Lynch expects will post a 2% to 4% same-store sales increase, despite a tough comparison with a 9% gain a year earlier. Sales at all three of its chains--Gap, Banana Republic and Old Navy--have been strong, Merrill analyst Mark Friedman said in a Monday research note.
"The stores truly look outstanding and they have been crowded," Friedman said. "There were markdowns but thus far very limited. The mood of the stores is very spirited."
