Macy's Wins, American Eagle Loses in Holiday Sales

Updated from 10:28 am EST with comp sales figures from Gap and Abercrombie & Fitch as well as closing stock prices.

NEW YORK (TheStreet) -- After the massive promotions seen at chain retailers during the holiday season, several companies are shining a light on how their December same-store sales held up and what that means for their respective fourth quarters.

Analysts have been forecasting a weak holiday season, given the six fewer holiday selling days this year as a result of a late Thanksgiving combined with customer preference for larger ticket items and shopping online at Amazon (AMZN), eBay (EBAY) and elsewhere.

According to the latest Thomson Reuters estimates, same-store sales for the 11 companies that still report monthly comps were an increase of 3.8%, surpassing consensus expectations for a 2.7% rise. Excluding the drugstore sector, sales gained 2.4% above the estimates of 1.9% growth.

In short, some generally better-than-expected results. Costco Wholesale (COST), the largest store that still reports monthly sales, helped fuel the increase, as the Issaquah, Wash.-based company's sales rose 6% for the five-week period ending Jan. 5 to $11.53 billion.

Sales comps during that period rose 3%, above expectations of 1.8%. Costco's U.S. sales comps of 5% also beat expectations of a 1% rise. Costco's sales comps excluding gas and foreign exchange rose 5% for the period.

Costco shares rose 3.9% to $118.51.

The apparel sector, however, didn't perform nearly as well. December same-store sales were expected to rise 2.3%, but came up short, rising just 1.3%.

"Mall traffic in December was lighter than normal, particularly hurting brick-and-mortar retailers. This may be offset somewhat from increased online shopping, but deliveries hit a snag when retailers guaranteed arrivals closer to Christmas and UPS (UPS) admitted it was overwhelmed," a Jan. 8 Thomson Reuters preview note said.

That said, the December sales reports "should benefit from the timing of Thanksgiving, which was near the end of November, allowing retailers to recognize revenue from the post-Thanksgiving sales in December," the note adds.

On Thursday that played out.

Gap (GPS) said after the market close that December sales were flat, below expectations of 1.3% comp sales growth. Gap's three largest brands -- Banana Republic, Old Navy and its flagship brand, all posted comps below expectations.

Still the San Francisco-based company reaffirmed its full-year earnings per share guidance range of $2.57 to $2.65 for fiscal 2013, noting that it is likely to deliver on the high end of that range.

Gap shares were rising 1.9% to $40.15 in post-markets trading.

L Brands (LB), the parent company of Victoria's Secret and Bath & Body Works reported sales of $2.1 billion for the five weeks ending Jan. 4, up 7.7% from the year-earlier period, which ended on Dec. 29. However the company reported same-store sales growth of just 2% last month compared to consensus estimates of 3.7%.

L Brands also tempered its January-ending fourth quarter earnings per share, expecting EPS of approximately $1.60 compared to its previous forecast of $1.67 to $1.82, citing lower merchandise margins as a result of its promotional activity during the quarter.

L Brands stock fell 4.1% to $57.75 on Thursday.

"The inventory per square foot increase of 7% (in-line with management's expectation) is related to additional investments in bras at VS, including Sport and pending clearance of the Body by Victoria merchandise," Stifel analyst Richard Jaffe writes in a note. "We see this inventory as a means to drive sales gains in January, albeit at low margins."

Teen retailer, The Buckle (BKE), which had the lowest comparable sales estimates of just 0.9% amongst the group said Thursday that comps actually fell 2.8% for the five week period. Net sales of $180.9 million fell 2.2% as compared to December 2012.

Shares fell 1.9% to $49.80.

As well, American Eagle Outfitters (AEO), a retailer that doesn't typically report monthly sales, said sales for the quarter so far feel 2% to $882 million and that sales comps slumped 7% during the nine-week period ending Jan. 4.

The company said it expects fourth-quarter earnings of 26 cents a share, on the low end of its previous guidance of 26 cents to 30 cents a share.

"Following a solid Thanksgiving weekend, traffic and sales through Christmas week were on the low end of our expectations and the retail environment was highly promotional, pressuring margins and EPS," CEO Richard Hanson said in a statement. "Our post-Christmas clearance event is meeting our expectations and we expect to end the year with inventories on plan. We are intensely focused on making fundamental improvements to our business as we adapt to a fast-changing retail landscape."

The stock rose 2% to $15.33 on Thursday.

On the other hand, Urban Outfitters (URBN), another retailer that doesn't typically report monthly sales, said Thursday that it managed to remain a step above the promotional mayhem last month. The Philadelphia-based parent company of Anthropologie, BHLDN, Free People, Terrain and Urban Outfitters brands, reported record net sales for the last two months of the year, up 8% as compared to 2012.

Urban Outfitters said comp sales for the two months rose 3%, fueled by double-digit comps of 21% at Free People and 11% at Anthropologie, offset by a 6% decline at its flagship brand. Urban's wholesale net sales rose 21%, it said.

Urban Outfitters shares closed up 0.37% to $38.01.

Shares of Abercrombie & Fitch  (ANF) surged 16.5% to $38.70 in post-market trading after the teen retailer boosted its fourth-quarter earnings guidance to a range of $1.55 to $1.65 a share, up from $1.40 to $1.50 a share, previously. Abercrombie said the increased earnings guidance is based on higher-than-expected sales in the quarter to date and its ongoing cost reduction efforts. The updated projection "assumes January comparable sales below the quarter-to-date trend reflecting a stronger prior year comparable sales base," the company said.

Abercrombie said that comp sales for the nine-week period ending Jan. 4 fell 6%, however direct-to-consumer sales jumped 25% in the period.

The disappointing sales comps from mall-based specialty retailers comes on the heels of Macy's (M) announcement on Wednesday that sales comps jumped 4.3% for the November and December holiday sales period, which included licensed merchandise sales. Excluding the third-party licensed merchandise sales comps during the holiday period rose 3.6%.

At the same time though, the department store chain said it would undergo a $100-million cost-savings initiative, which includes cutting about 2,500 employees, streamlining certain administrative functions and closing five Macy's stores in the spring.

"The 2013 holiday season was successful for Macy's and Bloomingdale's as we offered fresh and distinctive merchandise, delivered great value to the customer and provided a robust omnichannel shopping experience which served our customers whenever, however and wherever they chose to shop and to buy," Chairman and CEO Terry J. Lundgren said in a statement. "Even in a questionable macroeconomic environment with challenging weather in multiple states, the positive response from our customers during the holiday season is yet another vote of confidence that our well-established strategies continue to work for us."

The company maintained its full-year earnings guidance of $3.80 to $3.90 a share, which excludes charges related to its new cost-saving initiative. Macy's also said for 2014, it expects comparable sales of 2.5% to 3% with full-year earnings per share between $4.40 and $4.50 a share.

Macy's shares surged 7.6% to $55.80 and also hit a new 52-week intraday high of $56.25 earlier in the day.

Sterne Agee analyst Charles Grom reiterates his "buy" rating on the stock and raise his 12-month stock price target by $5 to $57.

"While new 4Q SSS guidance was a touch below our estimate, M continues to show why it is a top executor in the space with: its solid Holiday comp of 3.6%, initial FY14 guidance above the Street, and the announcement of a $100 million cost-savings program to boot," Grom writes in a note on Thursday. "When all is said and done, we believe M has the franchise strength, management talent, and balance sheet to keep shareholders happy."

BMO Capital Markets upgraded the stock to "outperform" from "market perform."

Analyst Shannon Coyne writes that the upgrade was based on "continued strong relative comp-store sales growth (4Q13 +2.3%-2.5%) that points to continued market share growth potential into 2014," according to a research note.

Coyne also points to Macy's management team "that is able to strike a consistent balance between sales and margin growth through strong locally assorted national and private brands."

The analysts also believes that the $100 million in cost savings is likely a conservative number, among other things.

Meanwhile, J.C. Penney (JCP) stock plunged 10% on Wednesday after it simply said it was "pleased with its performance for the holiday period, showing continued progress in its turnaround efforts." The Plano-based retailer reaffirmed its fourth-quarter outlook. Investors took the lack of news as a sign that the company did not do as well as it had hoped during the holiday season.

J.C. Penney shares recovered some of its losses, closing up 3.7% to $7.64.

-- Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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