November retail sales drop, investors hope for bottom

By Brad Dorfman

CHICAGO (Reuters) - Many retailers posted sharply lower November sales at stores open at least a year, prompting some investors to pour into the sector on hopes the dismal results signaled a bottom for share values.

Discounter Wal-Mart Stores Inc (WMT.N) bucked the trend with a bigger-than-expected rise, helped by lower gasoline prices and record sales of grocery items close to the U.S. Thanksgiving holiday.

Overall, same-store sales fell 2.1 percent, not quite as bad as the 2.4 percent average forecast, according to Thomson Reuters data.

Excluding results for Wal-Mart, the world's largest retailer, same-store sales fell 7.8 percent, worse than the 6.9 percent decline forecast by analysts, according to Thomson Reuters. That was the worst monthly performance since it began tracking sales data in 2000.

For example, Wal-Mart rival Target Corp (TGT.N) posted a 10.4 percent drop in November same-store sales and forecast a mid-single-digit to low-double-digit drop for December.

The November same-store sales drop was the worst in more than 35 years, according to the International Council of Shopping Centers, which also again cut its forecast for the November-December holiday season. It now is calling for holiday sales to be flat to down 1 percent, compared with its previous forecast of a 1 percent increase.

But in a sign for the better, nearly half of the 35 retailers reviewed by Thomson Reuters beat bleak sales estimates.

"The reaction is that worse than this, we're unlikely to see. And when you think in those terms, you begin looking forward positively," Gilford Securities retail analyst Bernard Sosnick said.

Several clothing retailers, including Gap Inc (GPS.N) and Pacific Sunwear of California (PSUN.O) also surprised forecasts with more moderate-than-expected declines. performed better than analysts had forecast.

Aggressive discounts and deals helped lure consumers into stores on Black Friday, the day after Thanksgiving that kicks off the key holiday shopping season. But that was the lone bright spot for most retailers and the price-cutting was also expected to eat into retailer margins.

Sales on Black Friday, which fell on November 28 this year, were a little better than expected, said Ken Perkins, president of research firm Retail Metrics.

"It caused the early (November) results to just simply be miserable instead of terrible," he said.

Wal-Mart shares rose 0.86 percent, while the Standard & Poor's Retail Index .RLX surged 2.2 percent. Nordstrom (JWN.N) shares rose 8.17 percent, Aeropostale (ARO.N) rose 7.97 percent and Gap shares gained 1.24 percent.

WORST MONTHLY DROP

Consumers facing a recession, job losses and tight credit have cut spending on all but the most essential items. During the Black Friday weekend, they mostly bought items that were deeply marked down, analysts said.