6 Black Friday Buys: Retail Earnings Reveal Holiday Winners

NEW YORK ( TheStreet) -- Retail stocks have rallied over the last several months, as investors await what is expected to be a very Merry Christmas for the sector.

Since the end of September, the S&P Retail Index has gained 4.5% to 478.49, which could indicate any good news coming out of Black Friday weekend may already be factored into the stocks.

Overall, Black Friday isn't the best day to base retail trades. While it is generally believed to be the one of the biggest, if not the biggest, sales day of the year, earlier promotions and procrastinating shoppers has made Black Friday more of a marketing hype rather than a day to place a bet.
Black Friday by the Numbers

Still, third-quarter earnings results over the past week have provided additional insight into what investors can expect for the holiday season. For some like Sears ( SHLD) and Gap ( GPS), third-quarter results and forecasts stirred up some worry on Wall Street.

But for others, quarterly results provided much-needed reassurance for investors amid stubbornly low unemployment, decline in GDP forecast, China inflation and other economic worries.

>>Black Friday Center

In light of all this, we offer a look at retailers whose third-quarter earnings results make the stock a Black Friday buy....

AnnTaylor Stores

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While AnnTaylor Stores ( ANN) isn't generally synonymous with door-buster deals and must-have gifts, the women's apparel retailer could be a big winner this holiday season.

Following third-quarter earnings results that significantly topped expectations, the company forecast fourth-quarter sales will approach $500 million. AnnTaylor is also calling for mid-to-high single-digit percentage increase in same-store sales during the holiday period.

By division, it foresees double-digit comparable sales growth at its namesake brand and low-single digit jump at its Loft chain.

"While we anticipate a promotional environment in the upcoming months, we feel good about our overall business as we enter the fourth quarter," Chief Executive Kay Krill said in a statement.

In its third quarter, AnnTaylor earned $24.2 million, or 41 cents a share, compared with $2.1 million, or 3 cents, in the year-ago period. Excluding one-time items, the company actually earned 42 cents a share, compared with analysts' forecast of 8 cents.

Sales climbed 9.3% to $505.3 million, also ahead of Wall Street's outlook of $492.8 million, while same-store sales spiked 11.2%.

The better-than-expected report sent shares to hit a two-year high on Friday of $26.12.

Limited Brands

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Limited Brands ( LTD) remains a standout in the retail sector, reporting a surge in third-quarter earnings and upping its full-year outlook.

The owner of Victoria's Secret and Bath & Body Works now expects full-year earnings in the range of $1.82 to $1.97 a share, from prior guidance of $1.68 to $1.83 a share. For the fourth quarter, which includes the holiday season, Limited is calling for earnings between $1.02 and $1.17 a share, compared with consensus estimates of $1.94.

Limited also said it will pay a special dividend of $3 a share on Dec. 21 to shareholders of record on Dec. 7. The board approved a $200 million share repurchase program, reflecting its confidence in its business and cash flow.

Its third-quarter was helped by more full-price selling, which boosted gross margin. During the quarter Limited earned $61.3 million, or 18 cents a share, from $14.9 million, or 5 cents, a year earlier.

As previously reported, Limited sales shot up 12% to $1.98 billion, while same-store sales surged 10% during the three-month period.

Buckle

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Buckle's ( BKE) strong back-to-school selling period is expected to translate into solid sales for the holiday period.

The premium denim retailer reported a 3% jump in its third-quarter profit to $34.4 million, or 73 cents per share, from $33.3 million, or 71 cents, last year. This beat analysts' expectations of 69 cents a share.

Buckle's revenue rose 5% to $243.4 million, also ahead of the $238 million Wall Street predicted. Same-store sales edged up 0.5%.

The company also announced a special dividend of $2.50, payable on Dec. 21 to shareholders of record as of Dec. 3.

Saks

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Saks ( SKS) is proving it will be a happy holiday for luxury players.

The upscale department store is predicting fourth-quarter sales will grow in the mid-single-digit range, after it reported higher profit and sales in the third quarter.

During the quarter Saks earned $36.3 million, or 20 cents a share, compared with $6.3 million, or 4 cents, in the year-ago period. Excluding items, earnings actually hit 6 cents a share, better than the 3 cents analysts predicted.

Sales grew 4.3% to $658.8 million, while same-store sales shot up 5.7%. Gross margin widened to 42.6% from 40.3% from more full-price selling.

While Saks will have some sale events on Black Friday and throughout the holiday season, overall, its promotional levels have dropped significantly from last year. CEO Steve Sadove told TheStreet that the company reduced discounting by about 30% in the first-half of the year.

During Saks' most recent Friends and Family event, it lowered the promotion from 25% off to 20% and excluded some brands.

Target

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Target ( TGT) expects to post its best same-store sales in three years during the holiday season.

The discounter foresees comparable sales rising between 2% and 4% in its fourth quarter.

This outlook comes after Target reported a 23% jump in third-quarter profit, handily topping estimates, though its sales missed forecasts. During the quarter it earned $535 million, or 74 cents a share, compared with $436 million, or 58 cents, in the year-ago period. Analysts were calling for a profit of 68 cents a share.

Sales rose 3% to $15.2 billion, while its same-store sales increased 1.6%. Wall Street predicted sales of $5.61 billion.

Target received a boost from improvement in its credit card business and strong food sales, and the company is banking on its new 5% rewards program for a boost.

"Based on our merchandising and marketing plans, combined with the expected impact of REDcard rewards and our newly completed remodel program, we expect Target's fourth quarter comparable-store performance will be the best of any quarter in the last three years," CEO Gregg Steinhafel said in a statement.

As expected, Target will be aggressive in its Black Friday promotions. Throughout November, Target celebrated "Mega Merry Mondays," with deals on 17 hot items, and "Total Toy Tuesdays," with discounts on five favorite toys.

Target will also offer free shipping when customers spend $50 or more from Nov. 21 through Dec. 11, and will host sales Thanksgiving day at Target.com that will feature 50% off electronics like cameras, televisions, Blu-ray players and video game consoles. It will be running a four-day sale in stores beginning Nov. 21, that will include up to 50% discounts on more than 170 gift items like toys, electronics and entertainment.

Macy's

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Macy's ( M) swung back to black in its third-quarter on sales strength during the back-to-school season.

The department store also upped its outlook for the second-half of the year, and now expects earnings between $1.50 and $1.55 a share, from a prior outlook of $1.45 to $1.50 a share. For the year, Macy's is calling for a profit of between $1.94 and $1.99 a share, compared with a previous outlook of $1.89 to $1.94 a share.

During the third quarter, Macy earned $10 million, or 2 cents a share, compared with a loss of $35 million, or 8 cents, in the year-ago period. Excluding items, the department store actually earned 8 cents a share, better than the 3 cents analysts expected.

Sales grew 6.5% to $5.62 billion from $5.27 billion last year, while same-store sales rose 3.9%. Analysts were calling for revenue of $5.55 billion.

Macy's has attributed much of its success to its localization imitative, as well as improved private-label offerings, like its juniors' "Material Girl" line.

For the holiday season, Macy's is offering free-shipping for the first time ever on purchases of $99 or more. This deal will run until Dec. 21.

Macy's is also opening its doors at 4 a.m. on Black Friday, offering discounts on everything from beauty items to electronics. The department store has hired about 65,000 seasonal employees to deal with the expected holiday rush.

--Written by Jeanine Poggi in New York.

>To see these stocks in action, visit the 6 Black Friday Buys portfolio on Stockpickr.

>To contact the writer of this article, click here: Jeanine Poggi.

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