Polar Vortex is the Latest Bad News for 4Q Retail

NEW YORK (TheStreet) - It doesn't look pretty for fourth-quarter earnings at many big retail chains, since it's safe to say that January retail sales are likely to be the pits.

There's a host of reasons why, including short-term factors that include bad weather, but longer term, the evolution of consumers' preference to shop online at Amazon (AMZN) is not helping retailers that depend on mall traffic, for instance.

Ken Perkins of Retail Metrics believes that chain store same-store sales for January will rise 2.7%, far lower than the 5.1% gain they saw in January 2013, according to his initial overview on Wednesday. Excluding drug stores, he expects same-store sales to rise 2.8%. Perkins also lowered his expectations for fourth-quarter same store sales growth to 0.7% from 1.1%.

"Santa proceeded to dump a big lump of coal in most retailers' stocking in December in what turned to be the most competitive/promotional Holiday period since the depths of the financial crisis in 2008," Perkins wrote in research note. "The coal looks to keep coming in January as promotions have remained heightened as retailers' effort to sell clearance merchandise and make way for initial spring receipts."

Given that most retailers' fourth-quarters end in January, the last month of their fiscal year isn't shaping up to be helpful.

"January is typically a clearance month that also benefits from gift card redemptions, but there has been no real catalyst for improved January sales," Perkins wrote. "The first two weeks of January got off to a slow start with our store checks suggesting down traffic and conversion levels from December."

On top of the more than two-dozen retailers that disclosed disappointing holiday sales guiding earnings expectations lower, retailers from Express (EXPR) to Lululemon Athletica (LULU) to Signet Jewelers (SIG) have already warned of disappointing January sales.

The latest tragedy among the retail fold was Wednesday's earnings release from Coach (COH). Coach reported lower-than-expected earnings and sales for the fourth quarter, citing disappointing holiday sales in the U.S. for the miss.

Weather hasn't helped the retailers either.

While Mother Nature was busy with several winter storms affecting the Midwest and East Coast in December, the "suboptimal weather has carried over into January, first with the Polar Vortex keeping most people huddled up inside followed by several more winter storms including this week's latest installment to hit the Washington to Boston corridor," Perkins wrote. "Temperatures have plummeted and consumers are likely to remain indoors and cold weather is expected to persist through the end of the month."

As if business wasn't tough enough, the security breaches at Target (TGT) and Neiman Marcus adds further fuel to the fire keeping customers at bay, according to Perkins.

The news gets worse. Already, Macy's (M), J.C. Penney (JCP), Sears (SHLD) have announced store closings.

Industry horn blowers like TheStreet's Rocco Pendola and Brian Sozzi are right to sound caution -- 2014 is just the beginning of the end for retail as we know it, because the retail roller coaster ride is just beginning.

--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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