By Phil Wahba
NEW YORK Jan 9 Many large U.S. retailers
slashed their earnings forecasts on Thursday because of steep
discounts they offered during the holidays to persuade reluctant
The discounts boosted overall industry sales but hurt
profits at many chains, including L Brands Inc, Family
Dollar Stores Inc and teen retailer Zumiez Inc.
Even retailers that reported big sales gains, like Kay Jewelers
parent Signet Jewelers Ltd, were not spared.
Fewer store visits and aggressive pricing at the start of
the season by big retailers like Amazon.com Inc and
Wal-Mart Stores Inc left many chains with little choice
but to offer sweeter deals. Many also had too much holiday
merchandise, which was ordered in late spring when retail
executives were feeling upbeat.
"The discounts needed to be deeper, and they needed to be
longer," said Joel Bines, managing director of consulting firm
The discounts did result in a stronger-than-expected 2.4
percent increase in December sales at nine retailers tracked by
the Thomson Reuters Same-Store Sales Index.
Still, L Brands cut its holiday-quarter profit forecast on
disappointing December sales at its Victoria Secret and La Senza
While L Brands' sales at stores open at least year rose 2
percent last month, Wall Street had been expecting a gain of 3.7
percent, according to Thomson Reuters I/B/E/S. The company's
shares fell more than 4 percent.
Zumiez reported an unexpected drop in same-store sales.
Shares of Signet, which is not part of the same-store sales
index, were down more than 6 percent even though it reported a 5
percent increase in U.S. same-store sales for the
November-December holiday season.
Gap Inc reported a lower-than-expected 1 percent
increase in comparable sales, hurt by weak business at its Old
Navy chain, but the retailer said it was "comfortable" its
full-year profit would come in at the high end of its own
forecast range. Shares rose 2 percent in after hours trading.
Sears Holdings, which is not in the same-store
sales index, reported dismal holiday results at its namesake and
KMart stores. Its shares tumbled after hours.
Toys R Us, also not in the index, said same-store sales were
up 1.8 percent at its U.S. stores.
DEALS, AND MORE DEALS
Between Nov. 3 and Jan. 4, eight retailers, including
Wal-Mart Stores Inc, Target Corp and Macy's Inc
, increased the number of circulars published by 6 percent
and sent 57 percent more promotional e-mails, according to data
prepared for Reuters by MarketTrack.
Retailers also had to deal with shoppers who were less
willing to go into stores: Data firm ShopperTrak this week said
foot traffic had dropped 14.6 percent this holiday season.
Walgreen Co, whose comparable sales of general
merchandise rose 2.5 percent in December, said fewer shoppers
had come to its drugstores.
Small clothing chain Cato Corp also slashed its
profit forecast after reporting poor December sales.
Still, some retailers offering staples at low prices fared
well. Warehouse club chain Costco Wholesale Corp
reported a 5 percent gain in U.S. same-store sales for December,
while Wall Street was expecting only 1 percent.
American Eagle Outfitters Inc said comparable sales
for November and December fell 7 percent and that it expected
its quarterly profit to come in at the bottom of its earlier
forecast range of 26 cents to 30 cents per share.
Family Dollar's same-store sales fell 3 percent last month.
American Eagle and Family Dollar are not part of the
same-store sales index.