Late Surge Drives Up Holiday Sales

By ABIGAIL GOLDMAN

Jan. 11, 2002 12 AM PT

TIMES STAFF WRITER

Consumers dragged their heels for most of the 2001 holiday shopping season but stepped it up just before and after Christmas, giving many retailers a much-better-than-expected December and hope that the first part of 2002 won’t be so bad.

Sales in the retail sector as a whole rose 2.3% in December compared with the year-ago month, mostly because discounters such as Wal-Mart Stores Inc. continued a year-long pattern of carrying the composite number higher. Goldman, Sachs & Co. had expected an overall retail sales gain of 0.9%.

Still, many retailers surprised investors Thursday with reports of strong sales or at least results not as far behind last year’s as some feared.

According to the Goldman Sachs tally, department stores saw sales slip 3.6%, better than the 4.7% decline analysts expected. Specialty hard goods sellers, including consumer electronics stores, gained 0.6%, better than an expected loss of 2%.

Discount stores, which Goldman Sachs estimated would gain 3.3%, rose 5.7%.

“The numbers came in stronger across the board,” said Michael Niemira, an economist with Bank of Tokyo-Mitsubishi in New York. “The breadth of the better-than-expected sales tells us that a lot of companies participated and got more of a lift at the end of the month. The numbers also paint a better picture of the industry, it shows better stability.”

Here’s a sampling of retailers, sorted by how well they did:

Clear Winners:

* Wal-Mart Stores. The world’s largest retail chain, and one of its most tried-and-true performers, said Thursday that strong sales in December helped it post annual sales of more than $203 billion, the first time it has topped $200 billion.

Wal-Mart said December sales for stores open at least a year were 8% better than last year’s, with its superstores gaining 8.2% and Sam’s Club warehouse stores rising 7.1%.

Analysts said consumers nervous about the economy after Sept. 11 didn’t stop buying, but many bought more carefully, with an eye toward getting more for their dollars. Same-store sales, or sales by stores open at least a year, are considered an important measure of a company’s overall health because the number excludes new and closed stores.

* Chico’s FAS Inc. Even with a tough-to-beat gain last year of 34%, women’s clothier Chico’s still was able to sell 14% more of its loose but well-constructed separates than last year at stores open at least a year. The department-store prices at Chico’s didn’t deter the company’s customer base--high-income women older than 30--showing that economic downturn or otherwise, some customer bases are more resilient than others and some companies are better at giving them the products they want.

* American Eagle Outfitters Inc. What Chico’s does for grown women, American Eagle tries to do for teens and apparently does well. With a 0.5% same-store sales gain, on top of a gain of 11.8% during the same period a year ago, American Eagle did well with reasonable prices and trendy appeal to young adults.

Although markdowns were probably a help in bringing in traffic, these stores offered less drastic reductions because of planned, already low promotional pricing, which likely means well-protected profit margins.

Strong With Reservations:

* Williams-Sonoma Inc. The parent of its namesake stores and Pottery Barn beat expectations, overcoming soft sales earlier in the year with a same-store gain for November and December of 5.5%, which included strong sales of full-price merchandise.

With the sales news, analysts--noting the company’s strong cost controls and fewer merchandise discounts--rushed to raise earnings estimates for the quarter and year.

Banc of America analyst Shelly Hale said sales of home electronics and furnishings outpaced the rest of the retail industry. At Williams-Sonoma, such products did well without discounts that eat into margins.

* J. C. Penney Co. The moderately priced department store, which spent the late 1990s boom lagging just about every other industry player, posted some of the strongest gains in the department stores division. Its 5.4% same-store sales gain beat estimates of a 4% to 5% rise.

Analysts attributed the positive changes at JCPenney stores--which include better merchandise assortments--to new management, led by one-time Federated Department Stores head Alan Questrom.

* Pacific Sunwear of California Inc. The Anaheim-based retailer of surf wear and skate wear products said its same-store sales gain of 4.1% for the five-week period ended Jan. 6 came from strong sales of shoes, girls’ clothing and accessories.

The 719-store chain, which in October had lowered fourth-quarter earnings projections to 33 to 37 cents a share, said it now expects profit of 40 to 41 cents a share, down from 43 cents a year ago.

Analysts were expecting a profit of 35 cents a share, according to a survey by Thomson Financial/First Call.

* Wet Seal Inc. The Foothill Ranch-based seller of clothes for girls and young women posted even rosier results for the holiday season, prompting the company to issue glowing projections for the new year.

Same-store sales surged 10.2% in the five-week period, the same gain as a year earlier. The 576-store chain expects the trend to continue, which should help boost earnings by 10% to 15% for 2002, said Chief Executive Kathy Bronstein.

* Target Corp. Capitalizing on the value trend but somewhat hampered by its traditional department stores division, Target nonetheless posted a slight sales gain for the month of 0.6%, versus expectations of a 2% to 3% company-wide loss.

Its namesake stores posted a 1.8% sales gain, its Mervyn’s division recorded a better-than-expected 0.6% sales decline and its Marshall Field’s stores were in line with expectations at a 10% sales slip.

Getting Better But ... :

* Gap Inc. The nation’s largest specialty store chain, which also owns Old Navy and Banana Republic, finally offered a positive surprise after posting months of dismal reports even worse than pessimistic Wall Street had expected. Its same-store sales loss of 11% still beat expectations of a far worse December.

The company also raised its earnings outlook for the current quarter, reversing its earlier statements that the company’s loss in its fiscal fourth quarter would be greater than its third-quarter shortfall of 6 cents per share. Still, some analysts warned about heavy promotions and a long road ahead.

Gap’s showing, however, wasn’t related to an improved offering and did nothing to address a tough competitive environment, said Thomas Weisel Partners analyst Anne-Marie Peterson.

Analyst Todd Slater of Lazard Freres & Co. in New York titled his Thursday report, “Gap: Hope Springs Eternal.”

Still Struggling:

* Kmart Corp. The nation’s second-largest discount chain beat estimates with a drop of only 1% in same-store sales in December, versus estimates of declines of between 2% to 4%. Still, after earlier analyst reports warned that the company may have to file for bankruptcy later this year if sales don’t improve and it doesn’t boost cash flow, no one is declaring a Kmart victory yet.

Kmart said Thursday its earnings for the fiscal year ending this month would fall short of Wall Street estimates and it disclosed it was in talks with lenders on supplemental financing. The company said it was discussing existing as well as supplemental financing as part of a review of its liquidity position.

Times staff writer Leslie Earnest contributed to this report, and Reuters was used in compiling it.

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Retail Surprises

Many retailers on Thursday posted better-than-expected same-store sales reports for December, although not all posted stock price gains. A sampling:

Better than expected

Company Change Close

American Eagle -$0.91 $27.99

Chico’s FAS -0.76 39.25

Costco +0.55 44.70

Federated +0.74 42.00

Gap +1.83 16.35

Limited +0.38 16.38