January 2nd, 2009, I posted a blog entry to this Blog titled “The Ghost of Christmas (Just) Past as a little play on the dismal sales season. Click here to Read . At that time, one of the points made was trading down is the reality. I’m following it up now with what the retailers are facing at the moment: The Ghost of Christmas Present.
In the new retailing climate you see that in the last week’s worth of results reporting, Big Lots is up, and Neiman Marcus is down. Closeout retailer Big Lots Inc. posted a better-than-expected quarterly profit, aided by lower freight costs, and raised its outlook for the holiday fourth quarter. The retailer, which specializes in sales of excess inventory from home appliances to toys, also said it would immediately start buying back $150 million of common shares.
Conversely, upscale retailer Neiman Marcus Inc. reported sharply lower quarterly profit as worried consumers continued to avoid luxury items amid a slowdown the company expects will last for some time. Sales at its namesake Neiman Marcus and Bergdorf Goodman stores open for at least a year, or same-store sales, continued to fall, dropping 14.9 percent during the quarter. Overall comparable sales, including its direct marketing segment, declined 13.7 percent.
Neiman Marcus, in a regulatory filing on Wednesday Dec 9th, cited "a challenging economic and retail environment" that it said would likely persist for an "extended period of time." The downward sales trend has continued in the current quarter, it said. Last week the company reported same-store sales at its Neiman Marcus and Bergdorf Goodman stores had fallen 12.7 percent in November, a period that includes the busy holiday shopping weekend following Thanksgiving. Those two store chains account for about 83 percent of the company's revenue. Neiman Marcus said it experienced weak demand across all geographic areas and that its apparel and home decor categories were particularly hard hit.
Value Shopping In
Clearly, the trickle to value shopping has become a stampede.
Big Lots, which shut down its small Internet operation during the third quarter, sells merchandise that others cannot. When manufacturers are left with extra inventory due to a discontinued line or a change in packaging requirements, they call Big Lots, which will buy the merchandise and sell it in its stores at discounted rates. Big Lots has been somewhat insulated from the downturn as shoppers seek its low prices on staples like food or paper towels.
The better-than-expected results came a day after many retailers posted much weaker-than-anticipated November sales as shoppers were keenly focused on bargains. While consumers have been "very stingy" on discretionary purchases, the home category is actually one of the best performers so far in the fourth quarter, according to Big Lots.
Big Lots is reaching out to it’s customers by introducing a loyalty-card program to offer discounts to frequent shoppers during the quarter, which more than 600,000 have already signed up for, Fishman said. Early sales of Christmas seasonal merchandise, such as decorations, were tough in October, but sales of those items are up so far in the current fourth quarter, he said.
Big Lots Profit Jumps
Big Lots net income in the third quarter ended on October 31 rose to $30.3 million, or 37 cents per share, from $12.2 million, or 15 cents per share, a year earlier. Big Lots' third-quarter sales rose 1.3 percent to $1.04 billion, while same-store sales, or sales at its locations open at least two years, fell 0.2 percent.
Big Lots, which has been signing deals to open stores in better locations as other retailers close their doors, said it opened 52 new stores this year -- two more than initially planned for. It is also cutting back on closing stores, and now plans to shut just 30 locations this year instead of 40. Big Lots said it plans to keep opening stores in better spots as such locations are now available and the cost has declined. The company expects to once again open more stores than it closes in fiscal 2010 and beyond.
For the fourth quarter, Big Lots expects earnings per share from continuing operations of $1.09 to $1.14, up from its August forecast of 99 cents to $1.04. The company expects comparable store sales to rise between 1.5 percent and 2.5 percent for the fourth quarter, and said comparable sales rose in that range in November.
Neiman Marcus Experiencing Shrinking Sales and Profits
At the Luxury end of the retailing spectrum, Neiman Marcus said revenue in the fiscal first quarter, ended October 31, fell 11.9 percent to $868.9 million. The privately-held company reported a net profit of $8.5 million, down from $12.9 million a year earlier. Neiman Marcus was acquired by an investor group led by Texas Pacific Group and Warburg Pincus LLC in October 2005.
As has been the case with rival upscale retailers Saks Inc and Nordstrom Inc Neiman Marcus has maintained tighter inventory controls to avoid having to steeply discount merchandise to get it off shelves. Last year it was not uncommon to see luxury stores slash prices by 70 percent. Neiman Marcus said its comparable inventories were 22.5 percent lower in the quarter than a year earlier. Neiman Marcus wasn’t the only retailer feeling the holiday pain, though.
Slow Start to Holidays as Many Retailers Post Weak Sales
U.S. retailers from Macy's to Costco posted much weaker-than-expected sales for November as shoppers focused only on big bargains at the start of the key holiday selling season. Some, like department store operator Macy's also forecast quarterly earnings below analysts' estimates.
Out of 15 retailers that reported by early Thursday December 3rd, 11 missed analyst estimates, including Costco Wholesale, Children's Place, Walgreen and Hot Topic, according to Thomson Reuters data.
Over the U.S. Thanksgiving weekend, consumers focused mostly on promotional deals and made few impulse purchases as concerns about the economy remained top of mind, analysts and executives said. Shoppers Targeted the featured promotional Items and stayed away from impulse purchases on “Black Friday” and Cyber Monday. Store chains also blamed warm November weather, which kept consumers from buying winter clothes.
On December 3rd, Macy's shares fell 2.7 percent in trading before the market opened, while Costco declined 2.8 percent. Teen retailers Aeropostale and Abercrombie & Fitch also saw their shares sink more than 7 percent after disappointing November results. The November sales results include the day after Thanksgiving, traditionally known as "Black Friday," when retailers offer rock-bottom prices to kick off the holiday shopping season.
Early data on weekend shopping from the U.S. Thanksgiving Day on Nov. 26 through Sunday showed only a slight increase in retail sales from the comparable 2008 period, when consumers were hammered by a deepening recession and credit crisis. As of Black Friday, analysts had forecast a 2.5 percent rise in November sales at stores open one year, according to Thomson Reuters data. But estimates shrank since the weekend, and as of Wednesday, analysts expected a 2.1 percent increase. That would still be the best showing since April 2008 and compares with a 7.8 percent decline in 2008, the worst drop since data started being tracked in 2000.
Retailers Protecting Profits by Controlling Inventories
Even if sales are flat or rise modestly during the holiday season, analysts said retailers should report improved profits because they have cut inventories and pared back costs to avoid the huge discounts they were forced into last year. For example, Victoria's Secret owner Limited Brands forecast a low-to-mid-single-digit decline in December same-store sales, but said it planned to be less promotional this month. The company also posted "significantly" higher November margins, "driven by improvements in each main business," Amie Preston, vice president of investor relations at Limited, said in a recorded message.
Retail sales data are closely watched as consumer spending makes up roughly 70 percent of the U.S. economy. But the figures also give an incomplete picture because many of the retailers that are key holiday destinations, including industry leader Wal-Mart, Best Buy and Amazon.com , do not report monthly sales. Macy's said on Thursday that same-store sales fell a worst-than-expected 6.1 percent during the month. It stood by its forecast calling for quarterly earnings of $1.00 to $1.05 a share, excluding one-time items, but that was still below analysts' expectations.
Teen Retailers Mixed
Abercrombie & Fitch's same-store sales fell 17 percent, far worse than the analysts' average view of a 9.3 percent drop. Also on Wednesday the 3rd, teen clothing retailer Hot Topic posted a worse-than-expected 11.7 percent drop. Aeropostale sales came in slightly worse than expected, with a 7 percent increase. The company's quarterly earnings forecast also disappointed some investors.
Results Vary by Retailer
Costco said same-store sales rose 6 percent, missing the analysts' average estimate of 8.1 percent. Same-store sales at U.S. locations rose 2 percent.
Children's Place posted a 13 percent drop in comparable sales, including online sales, compared with analysts' expectations of a 1 percent rise. "Customers gravitated towards the sale merchandise," a company spokeswoman said in a recorded message.
Walgreen, one of the largest retailers that reports monthly same-store sales figures, on Wednesday posted a 3.9 percent rise for November, below analysts' expectations. The drugstore chain also said Thanksgiving weekend was "notably softer."
On the positive side, Limited posted a better-than-expected 3 percent increase and home furnishings retailer Pier 1 Imports cited a strong Thanksgiving weekend as it reported a 13.7 percent increase in same-store sales for its third quarter ended Nov. 28.
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