NEW YORK (Reuters) - U.S. retailers posted their best sales gains in four years in November, as shoppers were drawn in by deals throughout a month that culminated with a surge in “Black Friday” traffic.
But analysts cautioned that if retailers want customer traffic to continue in December, they will need to continue the discounts, which could pressure profit margins.
The Thomson Reuters same-store sales index, based on 27 retailers reporting, showed an increase of 6 percent for November, compared with Wall Street’s estimate of 3.6 percent — the best increase since September 2006.
About three quarters of the retailers, including department store chain Macy’s Inc (M.N), discounter Target (TGT.N) and teen clothier Abercrombie & Fitch (ANF.N) reported gains in sales at stores open at least year.
“We’re seeing the results of pent-up demand,” said David Bassuk, a managing director at consulting firm AlixPartners. “There’s no question this was extremely driven by discounts.”
The S&P Retail Index .RLX rose 1 percent to a fresh 3-1/2 year high, although analysts were concerned about what the discounts could mean for retailers’ gross profit margins.
“People are smiling today, but there are going to be some big frowns coming later when profit results come out,” said Bassuk.
Macy’s same-store sales rose 6.1 percent last month, beating Wall Street’s forecast of 5 percent, and the company said it raised its profit outlook. But shares were down 1 percent as the fourth-quarter forecast indicated that earnings could be below loftier Wall Street expectations.
Retailers’ strong sales are the latest sign that the U.S. economic recovery is on track as consumer spending accounts for 70 percent of the economy.
Also on Thursday, the Labor Department reported that a key measure of U.S. jobless claims fell to its lowest level in more than two years.
The S&P Retail Index has risen 27 percent since August on hopes of improving earnings, leading some analysts to believe retailers’ shares are at a plateau.
For retail stocks to keep rising, shoppers need to keep spending and not be so reliant on specials, analysts said.
“Ultimately, whether these stocks (go up) is on the consumer’s shoulders,” said Wall Street Strategies analyst Brian Sozzi. “Consumers need to start adding leverage to their balance sheet” and spend more in non-holiday periods.
But shoppers, trained to seek out big discounts during the recession, may not be ready to spend more.
“I only shop with coupons. I refuse to pay for anything at full price,” said Adriana Petterman, a fashion recruiter from Long Island, N.Y., as she browsed Macy’s in Manhattan for a brown handbag. “I might not go back to the way I used to splurge on myself.”
Black Friday unofficially kicked off the holiday season last weekend, with early-bird discounts drawing hordes of people to retailers like Wal-Mart Stores Inc (WMT.N), Best Buy Co (BBY.N) and Macy’s before dawn. Wal-Mart and Best Buy do not report monthly sales.
The National Retail Federation forecast a gain of 2.3 percent in retail sales for the November-December holiday period, excluding online sales, following a 1.1 percent increase in 2009 and a 3.4 percent decline in 2008.
Michael Niemira, the chief economist for the International Council of Shopping Centers, said the Black Friday discounts were “aggressive” but planned, in contrast to the fire sales seen in recent years.
ICSC expects that momentum to continue this month and has forecast a same-store sales rise of between 3 percent and 3.5 percent in December.
Over Black Friday weekend, retailers benefited as more people spent money on themselves and weather cooled after a mild October, when people delayed buying winter clothes.
One of the few retailers to miss analyst forecasts was luxury retailer Saks Inc SKS.N, where November same-store sale rose 5.3 percent, well below the 9.5 percent gain anticipated by Wall Street. Rivals Nordstrom Inc (JWN.N) and Neiman Marcus Group NMRCUS.UL reported stronger sales gains.
Macy’s rivals J.C. Penney Co Inc (JCP.N) and Kohl’s Corp (KSS.N) also posted results above analyst forecasts. Global Hunter Securities analyst Richard Hastings said the success of department stores, with their wide array of products, reflected how broad the economy’s improvement is.
Teen clothing retailers, with the notable exception of Aeropostale Inc ARO.N and American Eagle Outfitters (AEO.N), handily beat forecasts. Abercrombie & Fitch said same-store sales were up 22 percent, and at Zumiez Inc (ZUMZ.O) they were up 20.7 percent. Abercrombie shares were up 10.4 percent.
Aeropostale posted a 1 percent decline in November same-store sales even though it was discounting its clothing by as much as 70 percent on Black Friday.
Reporting by Phil Wahba and Martinne Geller; additional reporting by Dhanya Skariachan, Jon Lentz and Helen Chernikoff. Editing by Lisa Von Ahn and Gunna Dickson