Retailers Look for a Miracle at the Mall

With the time running out on the 2002 holiday sales season, retailers are hoping that heavy discounting and brisk post-Christmas shoppers will push sales to $209 billion, making the season a success.

"It's touch and go, but it's not out of the question," says Scott Krugman, spokesman for the National Retail Federation. According to Krugman, the pattern this year is similar to that of 2001, when sales ultimately increased by about 5.6% year over year after being slow as late as the day before Christmas.

The NRF has forecast retail sales of $209 billion for November and December, a 4% increase over last year's sales of $201 billion.

Despite the NRF's doggedly optimistic stance, most of the other indications today were far from upbeat.

Retail giant Wal-Mart(WMT Quote - Cramer on WMT - Stock Picks) lowered its already low expectations on December sales Thursday, saying that it expects same-store sales to increase a meager 2% to 3% over last year, down from an earlier forecast of 3% to 5%. Despite a surge in last-minute sales, "the increase was too late and too little for us to reach our sales plan," Wal-Mart said in a recorded update.

Wal-Mart's December same-store sales rose a stronger-than-expected 8% last year, despite the hangover from the Sept. 11 attacks.

The bad news prompted analysts at Prudential Financial to cut earnings estimates for the Bentonville, Ark.-based retailer. Walter Hood and Mathew Laing lowered their current quarter sales estimate to 53 cents a diluted share, from 56 cents, which lowered fiscal 2002 estimates to $1.77 from $1.80. Consensus estimate of analysts polled by Thomson Financial/First Call is 55 cents a share for the quarter and $1.79 for the fiscal year. Prudential does no investment banking. W.R. Hambrecht has a banking relationship with the retailer.

Retailers were offering deep discounts in hopes that the week after Christmas would be busier than the week before, which fell short of many retailers' expectations. The suspects: a late Thanksgiving that chopped several days out of the sales cycle, continued high unemployment and low consumer confidence.

A report by UBS Warburg said same-store sales for Federated (F Quote - Cramer on F - Stock Picks), Target (TGT Quote - Cramer on TGT - Stock Picks) and J.C. Penney (JCP Quote - Cramer on JCP - Stock Picks) were below plan in mid- to late December, although Penney reported slightly better-than-expected results for the month so far. Despite the poor holiday reports, W.R. Hambrecht analyst Bill Dreher said the chain should still meet earnings per share estimate of 76 cents for the quarter, a gain of 3 cents over the year-earlier quarter.