November Retail Sales Disappoint

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Without question, November retail sales numbers have been lackluster. Although the number of retailers that report monthly sales figures continues to decline, let’s take a look at some of the interesting insights we saw from those that still report numbers.


Even though we’re fairly bearish on Kohl’s (NYSE: KSS) over the long term, we did not expect the fourth quarter to start off so poorly. Same-store sales fell 5.6% year-over-year, lapping a 6.2% decline during the same period in 2011. Total sales fell 4.9%, and the company continues to lose momentum. The firm blamed Hurricane Sandy and recognizing e-commerce sales in December as the major drivers of weakness, but we think the results highlight how poorly management is executing. We thought the firm gave intentionally weak guidance, but if November is any indication, previous guidance may prove to be optimistic. We’re staying away from shares.


Department store Macy’s (NYSE: M) reported weaker than anticipated same-store sales of -0.7% compared to a consensus estimate of 1.5% growth. The company blamed Sandy, which is more reasonable than Kohl’s blaming Sandy, in our view, since the company is so heavily leveraged to the northeast. Macy’s noted that Thanksgiving weekend was its largest in company history, and we believe the firm’s fantastic multi-channel selling strategy will yield strong results in the fourth quarter. Online sales jumped 39.2% during the month. We continue to believe shares are fairly valued.


Nordstrom’s (NYSE: JWN) November same-store sales were also weak, falling 1.1% year-over-year. The company also announced it will join Macy’s, Saks and JC Penney in no longer providing monthly same-store sales data.

Regardless, our key takeaway was the continued divergence between Nordstrom and Nordstrom Rack, with the flagship same-store sales falling 2%, while Rack jumped 4.2%. Not surprisingly, Sandy was one excuse, but the company also blamed weakness in clearance events for women and children as a driver. According to management, consumers want “newness” (not the first time we’ve heard this), so having a fresh mix enter the store during the holiday season will be crucial, in our view. We aren’t interested in shares for the portfolio of our Best Ideas Newsletter at this time.


While the previous companies struggled mightily in November, Gap (NYSE: GPS) saw same-store sales jump 3% year-over-year during the month, though that figure compares to a 5% decline in November of 2011. The number also represents the second consecutive month of sequential deceleration (September: 6%, October: 4%), suggesting the firm’s momentum is slowing.

Gap and Banana Republic North America outperformed Old Navy, growing 5% and 3%, respectively versus a 1% growth rate for Old Navy (coming off -9% in November 2011). We’re optimistic about the new management leading Old Navy, which we think could result in some revenue upside. Unfortunately, it won’t be this quarter or season, so we’re looking to Summer/Fall 2013 to see a turnaround. Even though shares have fallen substantially today, we continue to believe they are fairly valued.

TJX Companies/Ross Stores

Same-store sales growth at both TJX Companies (NYSE: TJX) and Ross Stores were slower during November, with same-store sales advancing 3% and 2%, respectively. Neither blamed Sandy, though we think it impacted TJX slightly more than Ross.

We don’t view the monthly results as any sign of weakness in either of the firm’s business models, but it is a sign that sales for the entire retail industry were weak during November. We also think both firms may be suffering from discount competition from eBay  and Amazon, both of which performed extraordinarily well on Black Friday weekend.

Limited Brands

Growth at Limited Brands (NYSE: LTD) was solid, with same-store sales up 5% in November compared to an increase of 3% in October. Victoria’s Secret followed up a monster November 2011 (up 11%) with a 4% increase in November 2012. Bath & Body Works jumped 6% year-over-year, and the company continues to execute well in stores and online. We’re not interested in shares, since they score just a 6 on the Valuentum Buying Index (our stock-selection methodology).

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