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Analysts still can't figure out the confusing consumer-spending trends in the retail sector last month. They're calling for a mixed bag when the major chains report same-store sales over the next two days, with luxury retailers expected to be the big winners.

"December was one of the most bewildering holiday months in recent history," said Northeast Securities analyst Eric Beder. "Significant weather shifts, a concerted effort by retailers to stem the tide of discounting, and skittish consumers waiting until the very last minute to shop all served to create a very uneven season."

December same-store sales are expected to be up 4% to 5% overall, compared with November's 3.7% increase, according to the International Council of Shopping Centers. Traditionally, December is a huge month for retailers, sometimes amounting for as much as half a company's sales in the fourth quarter. A smattering of sales reports will come out Thursday before the floodgates open Thursday morning.

Blaylock & Partners analyst Mark Mandel believes the month's lower-than-expected sales can be attributed to the poor weather, which helped jump-start Internet sales. He also cited the growing strength of gift certificate sales, which should benefit January total sales, but at December's expense.

December's economic news echoed the disappointing sales trends. The Conference Board's consumer confidence index dropped to 91.3, compared with analysts' 92.3 estimate and November's revised reading of 92.5. And the University of Michigan's consumer sentiment index was a revised 92.6, from November's reading of 93.7.

Beder expects three key themes for December: Discount retailers cut prices too early, which drove sales too late; "differentiated" specialty retailers did very well; and luxury goods flew out the door. Additionally, analysts contend that lower-income consumers were less willing to spend on discretionary items.

The heavy discounting on items such as electronics and toys early in the season ultimately hurt overall volume, Beder believes. He is dubious about the potential for earnings upside to his estimates on

Target

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and

Big Lots

(BLI)

.

Beder expects both Big Lots' and Target's December same-store sales to rise 2% to 4%, compared with a negative 0.3% comp at Target in December 2002, and a positive 9.7% comp at Big Lots in 2002. At Target, which along with rival

Wal-Mart

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kept investors apprised of sales on a weekly basis, Beder expects that pharmacy and electronic sales were the biggest drivers.

Meanwhile, home d¿cor and ladies and men's items are seen as the weakest. The only strong week for Target was the fourth week in December, but by then the chain was trading margin for traffic, he said.

He pointed out that Big Lots didn't beat its sales goals until the week before Christmas, but noted the company wasn't involved in electronics and toys price wars. Blaylock's Mandel also expects a 2% to 4% comp increase at Big Lots, down from an original estimate of 4% to 6%, and he sees 3% to 4% same-store sales growth, down from a 4% to 6% original expectation, for Target.

At Wal-Mart, the world's largest retailer by revenue, Mandel sees same-store sales rising 3% to 4%, which is largely in line with analysts' overall estimates. Mandel's estimate, however, is down from his original forecast of a 3% to 5% increase in comps. He cited the company's weekly sales having trended toward the low end of its 3% to 5% plan.

In the specialty retail space, Beder believes consumers were willing to pay more money for more fashion. The top winners in his coverage area were

bebe

(BEBE)

and

Guess?

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, both of which Beder expects to have positive 5% to 7% comps vs. bebe's 5% decline in December 2002 and a 1.1% drop at Guess?.

Bebe, he said, did very little discounting. At Guess?, sales of outerwear, shirts and bottoms for men were big, while discounting was also muted.

Lastly, Beder sees the luxury retailer

Neiman-Marcus

(NMGA)

as a big beneficiary of an increase in spending by upper-end consumers. The analyst sees a December same-store sales rise of 5% to 7% at the company, compared with a drop of 2.8% in the same period last year.

"Holiday 2003 was a rare period when Neiman-Marcus could focus on driving full price selling of early spring/resort looks in what is historically a clearance period," he said.

Nordstrom

(JWN) - Get Nordstrom, Inc. Report

is another big luxury winner, according to Bear Stearns analyst Dana Telsey, who expects a total 3% to 4% increase in 2003's holiday sales, compared with a 2% increase in the prior year.

"Sales should benefit as higher-income households drove spending this holiday season," she said.

Meanwhile, at the department stores, Telsey expects comps to come in at the low end, citing higher promotions.

Kohl's

(KSS) - Get Kohl's Corporation Report

, for example, is expected to be a big loser, with a midsingle-digit drop, compared with a 3.3% increase in December 2002.

Mandel expects flat-to-down-5% comps at Kohl's. If analysts' forecasts come true, the results would continue the company's already dismal same-store sales trend of late; it posted a 4.4% drop in same-store sales in November 2003 and an 11.6% decline in October.

Telsey forecast

J.C. Penney's

(JCP) - Get J. C. Penney Company, Inc. Report

comps in a range of negative 1% to positive 1%, which would be below the company's own positive 1% to 3% goal and trail its 4.7% increase in the prior year.

Like Kohl's, J.C. Penney has had weak same-store sales lately. In November, the company posted an 0.8% drop on top of a 2.3% decline in October.

"J.C. Penney's December calendar was packed with promotions in terms of sales events, with more TV/radio broadcasting as well as preprint pages compared to last year," Telsey said.