December 27, 2011 / 5:19 PM / in 6 years

From Macy's to Sears, tales of holiday highs, lows

(Reuters) - Macy’s Inc (M.N), Wal-Mart (WMT.N) and others continue to get high marks from Wall Street as the busy season draws to a close, while Sears Holdings Corp (SHLD.O) proved that it was really not a jolly holiday for all stores.

Sears said it would close dozens of Sears and Kmart stores after seeing sales at its existing locations drop 5.2 percent from the beginning of the quarter through Christmas. Its shares plunged 21 percent on Tuesday.

The announcement comes two weeks after Best Buy Co Inc (BBY.N) said that offering bigger discounts to kick-start the holiday season ate into its profits.

Retailers with the right mix of controlled discounts this season included Macy’s and Wal-Mart Stores Inc, analysts said.

“I see Macy’s as the market-share winner,” said independent retail analyst Brian Sozzi, who said shoppers did not see “slash-and-burn discounting” at the department store chain.

“They are the destination place among department stores,” he said.

Walmart’s return to layaway helped the world’s largest retailer and pressured others. Layaway sales, where items are put aside for customers until they fully pay for them, fell at Kmart, while Target Corp (TGT.N) saw sales of toys crimped by Walmart’s layaway push even before Thanksgiving.

Retailers are expected to ring up $469.1 billion in holiday season sales, or a rise of 3.8 percent from 2010, according to the National Retail Federation.

Meanwhile, U.S. consumer confidence rose to an eight-month high in December, the Conference Board said, suggesting that Americans have a brighter take on the economy heading into 2012.

The S&P retail index .RLX was flat on Tuesday, roughly in line with the broader S&P 500 index .SPX.


In general, analysts said that retailers did a good job of having the right level of inventory in place, which meant there was not a need for major panicked discounting.

In some cases, there were even items out of stock, such as certain watches and men’s dress shirts in Macy‘s, said Sozzi.

But it appeared that few retailers predicted just how mild the weather would be so far in most parts of the country, leading to a glut of warm coats, sweaters and other items.

    That could put pressure on companies such as winter outerwear makers VF Corp (VFC.N), which makes The North Face line, and Columbia Sportswear Co (COLM.O), said Craig Johnson, president of Customer Growth Partners.

    “While the economic tone seems a bit better, the lower-end consumer is still most constrained and thus we think investors are still best positioned in those companies targeting higher-end consumers,” such as Tiffany & Co (TIF.N), True Religion Apparel Inc TRLG.O and Nordstrom Inc (JWN.N), said Caris & Company analyst Dorothy Lakner.

    Lakner’s favorite small and mid-cap stocks are Zumiez Inc (ZUMZ.O) and American Eagle Outfitters Inc (AEO.N), “where specific strategies set them apart from their competition,” she said.

    Among chains catering to teens, American Eagle appeared to have “better traffic consistently” throughout the season, while Abercrombie & Fitch Co (ANF.N) kept its prices too high, even with discounts, said Sozzi.

    American Eagle’s success has come at the expense of the higher priced Abercrombie, which got hammered,” said Johnson.

    Another teen player, Aeropostale Inc ARO.N, struggled without fresh fashion and lost out to competitors such as Forever 21, H&M (HMb.ST) and Fast Retailing’s (9983.T) Uniqlo, he said.

    Lakner also called out Children’s Place Retail Stores Inc (PLCE.O) as one of retail’s “best turnaround stories.”

    Reporting by Jessica Wohl in Chicago and Phil Wahba in New York. Editing by Gunna Dickson

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