U.S. retail sales disappointed in November even accounting for expectations that Hurricane Sandy would hurt demand in the early part of the month. What wasn’t expected was the winter storm that struck the same region a week later as many were still reeling from the superstorm.
While the Black Friday shopping frenzy helped offset losses early in the month, increased online and layaway sales hurt performance because those purchases don’t count until items have shipped or have been fully paid off, meaning they carry over to December or later. Plus, Cyber-Monday, where an estimated $1.5 billion was spent on online shopping, isn’t counted in November because many retailers end the month in the last weekend.
Sales at major chain stores open at least a year, a widely used indicator that excludes the sales "bump" that newly opened stores experience, rose an average of 1.6 percent, down considerably from 3.5 percent last year. A poll of 18 key retailers that report monthly same-store sales had estimated sales would grow 3.3 percent, according to Thomson Reuters I/B/E/S.
Consumer confidence rose this month to a five-year high, according to the Conference Board, but the detrimental effects of store closings and consumer latency caused by Hurricane Sandy carried over to November.
The two biggest players to report on Thursday – Cincinnati-based mid- to high-range department store Macy's, Inc. (NYSE: M) and discount department stores chain Target Corporation (NYSE: TGT) of Minneapolis – both disappointed Wall Street by reporting less-than-expected sales growth of 0.7 percent and 1 percent, respectively. Macy’s saw its share price decline more than 3 percent to $39.11 on Thursday. Target’s share price recovered from an early 3 percent drop and was trading down 0.67 percent to $62.39 late Thursday afternoon.
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Target’s lackluster performance was based on “weaker-than-planned sales performance in the first two weeks combined with stronger sales growth across all channels later in the month,” said Gregg Steinhafel, Target’s chairman, president and chief executive officer, in a statement announcing the sales report.
“Despite the largest-volume Thanksgiving weekend in our company’s history, we were not able to overcome the weak start to the month, which included the disruption of Hurricane Sandy,” said Terry J. Lundgren, Macy’s chairman, president and chief executive officer, in his announcement.
Family department store and home accessories chain Kohl's Corporation (NYSE: KSS) of Menominee Falls, Wis., was a big loser this month with a surprising 5.6 percent drop in sales, far lower than the estimated 2.1 percent increase. The bad news shoved Kohl’s share price down more than 10 percent to $45.92 in afternoon trading.
While admitting this month’s performance was lower than expected, Kevin Mansell, Kohl’s chairman, president and chief executive officer, said in his company’s announcement that e-commerce operations were up 50 percent, “with most of these sales being recognized in December.”
Investors will look to the next three weeks to see if the weather truly is to blame for a disappointing November.
Here's a look at how other major retailers fared in October.
Costco Wholesale Corporation (NASDAQ: COST)
The Issaquah, Wash.-based membership warehouse said sales rose 6 percent, beating expectations of 5.4 percent. Sales advanced 5 percent internationally and 6 percent in the U.S., excluding the impact of gasoline-price inflation and a stronger dollar. The company reported its sales on Wednesday as it also unveiled a $3-billion, $7 per share dividend.
“Our strong balance sheet and favorable access to the credit markets allow us to provide shareholders with this dividend, while also preserving financial and operational flexibility to grow our business globally,” said Richard Galanti, executive vice president and chief financial officer, in announcing the November sales and the dividend payment, which will be funded by three debt offerings with the papers due between December 2015 and December 2019.
Shares of Costco Wholesale Corp. (Nasdaq: COST) jumped 3.7 percent to $100.09 on Wednesday after the announcement. The stock was down slightly Thursday but maintained the above-$100 price it struck for the first time in its history in early September before dipping into the $90-$100 range for most of the past two months.
The TJX Companies, Inc. (NYSE: TJX)
TJX, owner of off-price retailer stores T.J. Maxx and Marshalls, said sales in October rose 3 percent, against a forecast increase of 3.6 percent.
The Framingham, Mass.-based company maintained its rosy forecast for December and the fourth quarter. On Thursday it announced a 11.5 cents per share common stock dividend payable on March to shareholders on record in February.
The dividend announcement boosted TJX shares 0.64 percent to $44.32.
The Gap Inc. (NYSE: GPS)
San Francisco-based Gap, the largest U.S. specialty apparel chain, which has seen its stock price nearly double since the start of the year, saw some of this momentum slow to a disappointing 3 percent gain in November against a forecast of 3.8 percent.
The company’s discount Old Navy stores saw a 1 percent rise, while its high-end Banana Republic brand saw a 3 percent rise. The core Gap brand climbed 5 percent. International sales grew 3 percent compared to a 9-percent decline last year.
The company increased its fiscal 2012 earnings per share guidance to between $2.20 and $2.25, but the news wasn’t enough to keep the stock price from falling 3.94 percent to $34.41. The stock price entered the year at $18 per share.
Limited Brands, Inc. (NYSE: LTD)
Same-store sales at Limited Brands, the Columbus, Ohio-based owner of Victoria's Secret and Bath & Body Works, beat the average growth estimate of 3.4 percent, ending the month with a 5 percent gain on robust sales of lingerie and bath goodies.
Shares of the company were buoyed by the good news, rising 1.3 percent to $51.45.
Nordstrom, Inc. (NYSE:JWN)
Nordstrom, the Seattle-based upscale department-store chain, reported a 1.1-percent rise in November sales, considerably lower than the expected average of 4.4 percent.
In addition to blaming closures in the Northeast due to Hurricane Sandy and the subsequent winter storm, the company said the poor performance was also “largely attributable to a lower than planned half-yearly sale for women and kids.” It said the last half of the month was in line with historical trends. Not so much for the first half, though.
Shares of Nordstrom Inc. (NYSE: JWN) fell 1.52 percent to $54.36. The stock has gained more than 9 percent since the start of the year.