December Retail Sales Roundup
RJ is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Let’s take a look at retailers that still report monthly results.
Nordstrom’s (NYSE: JWN) December was strong as usual, with same-store sales jumping 8.6% and total sales increasing 9.4%. We saw some weakness from the full-line Nordstrom store in November, but that trend was reversed by an 8.2% same-store sales gain in December. Nordstrom Rack continued to post fantastic results, with an 8.1% jump in same-store sales for December. All retailers benefitted from a more favorable calendar compared to 2011, but we think Nordstrom’s execution was strong regardless. Nordstrom continues to be among our favorite multi-line retailers, but we think its shares are fairly valued at current levels. Unlike other retailers, we aren’t worried about gross margin pressure from heavy discounting.
Wisconsin-based Kohl’s (NYSE: KSS) provided fairly bullish guidance for fourth quarter sales, and the retailer looks poised to disappoint. Same-store sales increased 3.4% compared to the same period a year ago, below management’s expectations. More importantly, however, the growth came late in the quarter at reduced prices. Kohl’s lowered its already weak guidance to $1.60-$1.62 per share in the fourth quarter—well below its previous guidance of $2.00-$2.08 per share. Without question, Kohl’s fourth quarter looks to be a disaster. We remain bearish on Kohl’s current retailing strategy, and we wonder if a change in management could materialize in 2013. Though its valuation is starting to look attractive, the firm’s Valuentum Buying Index (our stock-selection methodology) score reveals a poor technical assessment that will keep us on the sidelines for now.
Stein Mart is not a retailer we normally focus on much since its total sales are dwarfed by much larger peers. However, the Florida and California-centric firm posted fantastic same-store sales growth of 5.9% in December. Two of the nation’s largest victims from the Great Recession appear to be recovering at an accelerated pace, which is incredibly positive for the US economy. A possible beneficiary is the California-heavy Big 5, where we’ve seen a fundamental turnaround in the core business recently
TJX Companies and Ross Stores
Not surprisingly, TJX Companies (NYSE: TJX), also known as TJ Maxx and Marshall’s, reported fantastic same-store sales growth in December. Same-store sales jumped 6% compared to an 8% year-over-year increase in the same period last year as the company continues to capitalize on consumers’ taste for brand names at value prices.
At the risk of sounding like a broken record, Ross Stores also posted strong results, easily exceeding its guidance of 2%-3% same-store sales growth with growth of 6%. The firm raised its earnings guidance to $1.05-$1.06 per share (was $0.99-$1.04) and continues to execute well.
For the time being, both TJX and Ross have business models that are relatively immune to online competition—with the exception of eBay—and provide consumers with a favorable shopping experience. Unfortunately, the market is properly valuing both firms at this time, so we won’t be looking to add either name to the portfolio of our Best Ideas Newsletter.
When it comes to e-commerce, few brick-and-mortar retailers are executing as well as Macy’s. Online sales for December jumped a whopping 51.7% compared to the same period a year ago, driven by the company’s focus on free shipping, discounting, and guaranteeing orders in time for Christmas (if you didn’t get it on time, you may have received a gift card as compensation). Total same-store sales jumped 4.1% in December, though, as with Kohl’s, we wouldn’t be shocked to see some margin pressure in the fourth quarter, as the firm was highly promotional. Nevertheless, shares remain fairly valued.
Gap’s (NYSE: GPS) December sales were solid, but certainly not spectacular. Same-store sales jumped 5% in December, a materially improvement compared to the 4% decline the retailer suffered in December of 2011. Gap North America and Banana Republic North America saw same-store sales jump 2% and 1%, respectively, but our recent checks indicate that the two retailers have had a difficult time moving older inventory. Old Navy experienced 13% growth, and the international segment continued to struggle, with same-store sales falling 6%.
The firm had a terrific run through the course of 2012, but we think 2013 could be challenging for the core Gap and Banana Republic businesses. Management seems to agree, as it announced the acquisition of high-end boutique INTERMIX, joining Lululemon competitor Athleta in diversifying its business lines. The company also authorized a $1 billion share repurchase program in hopes of driving earnings per share growth. Though shares have pulled back recently, we continue to believe the company is fairly valued.
Limited Brands December sales were a bit disappointing, in our view. The heart of the business, Victoria’s Secret, was highly promotional, and posted flat year-over-year same-store sales growth. Bath & Body Works’ same-store sales jumped 7%, but considering its smaller impact on the bottom line, we fear Limited Brands’ fourth quarter
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