Holiday tally: Retail's winners and losers

Luxury sellers shine, department stores surprisingly popular with shoppers, but there isn't much cheer at Wal-Mart and Gap.

By Parija B. Kavilanz, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- As the dust begins to settle on what looks to be a disappointing 2006 holiday shopping season, industry experts are tallying retail's winners and losers.

Joseph Feldman, senior research analyst with research firm Telsey Advisory Group, said luxury merchants, electronics sellers and e-tailers emerged as the obvious holiday winners this year in terms of November and December sales, unique products and overall customer service and satisfaction.

Chain stores are slated to report their December same-store numbers next week. Same-store sales - or sales at retail stores open at least a year - are a key metric that investors use to gauge a retailer's performance.

A lack of exciting fashions, combined with warmer-than-usual weather, really hurt winter apparel and accessories sales at some clothing chains such as the Gap (Charts) and women's clothing sellers Chico's FAS and Ann Taylor. All three of these retailers reported poor same-store sales numbers in November, and on Tuesday, their shares were lower on the New York Stock Exchange.

CNNMoney.com asked Feldman and other experts for their picks of retail's winners and losers this holiday season.

The winners are..

High-end heaven: Analysts cited Nordstrom (Charts), Tiffany and Coach as three winners.

Indeed, the luxury space has been on an upswing for almost two years. "There's a clear divergence in retailing between the upmarket and downmarket retailers," said Frank Badillo, senior economist with consulting firm Retail Forward.

While rising fuel prices have generally hurt consumers' ability to spend freely, gas price inflation has affected low-income households more than upper-income families. Moreover, Badillo said the trends of an improving job market and income gains are favoring higher-income consumers.

"Therefore, these consumers haven't felt the need to change their shopping patterns," he said.

Richard Hastings, senior retail economist with Bernard Sands, pointed out another factor that's bolstering luxury spending. "Any retailer that has unique products and outstanding customer service will emerge a winner with consumers. Nordstrom, Coach and Neiman-Marcus are very successful in those areas," he said.

E-tailing on fire: Online retailing is the fastest-growing segment in retail; this year it will represent more than 3 percent of total retail sales for the first time ever.

Frazzled shoppers are becoming enamored with the convenience of shopping from home. Also, experts said e-tailers have also boosted sales by offering extended shipping guarantees and improving their ability to deliver the goods on time.

On December 21 ComScore Networks upped its holiday forecast to $20.6 billion, citing much stronger-than-expected online sales activity.

Consumer electronics: Lots of demand for flat-screen TVs, MP3 players and other gadgets ensured that this sector would be a definite winner in terms of traffic trends and volume of transactions.

However, the price wars over flat-panel TVs flattened profits at Best Buy (Charts) and Circuit City (Charts).

Said Hastings, "I would say that consumers were the ultimate winners here because of all the discounts and retailers' price-match policies on TVs and other gadgets."

Department store revival: Analysts also gave a thumbs-up to J.C. Penney and Kohl's.

Federated Department Stores' Macy's and Bloomingdales divisions earned positive reviews although one expert voiced some concern about Federated's sales numbers.

Retail Forward's Badillo said Federated's decision to move Macy's more upmarket and improve the retailer's private label merchandise paid off.

Others said Macy's did a much better job this year with its holiday marketing strategy. "I'm in awe of their marketing," said Candace Corlett, retail analyst with WSL Strategic Retail. "As soon as you swiped your card at the Macy's store, they'd send you more coupons in the mail," she said.

But Love Goel, CEO of Growth Ventures, an investment firm focused on retailers, was more cautious. He cited very weak performance at Federated's May department stores, which the company acquired in February 2005.

"The integration isn't going too well," said Goel, who speculated that Federated could emerge the single biggest loser of the season. "May stores, which make up half of Federated's store base, are doing very badly. Macy's sales are doing well. But the net effect could be a negative because of the drag from May," Goel said.

Jewelry sparkles: The consensus among analysts is that the movie "Blood Diamond"had little to no impact on diamond jewelry sales.

The jewelry industry was concerned that the controversial film, which showcases illicit gem trade in Africa, could deter consumers from buying diamond jewelry.

But Sherrie McAvoy, a retail sector analyst with Deloitte & Touche, estimates that jewelry sales rose slightly year-over-year, thanks in part to a late-season surge from procrastinators.

.... and the losers

Discount doldrums: Despite Wal-Mart's (Charts) early holiday price-cutting, the world's largest retailer failed to generate the sales it sorely needed in November. Wal-Mart posted a dismal 0.1 percent dip in sales at it stores open at least a year, which is a key measure of retail performance known as same-store sales.

Rival Target (Charts) fared better. But analysts said Target probably benefited from the weakness at Wal-Mart. So what went wrong?

Said Badillo, "Wal-Mart's core shoppers are low-income families. Those families go after the big deals and that's it. Target has slightly more upscale shoppers who can afford more."

Bernard Sand's Hastings also faulted Wal-Mart and Target for not having "exciting" holiday products other than some good deals in toys and electronics.

However, analysts pegged wholesale club operator Costco (Charts) as a sector winner for continuing to surprise its customers with unexpected products such as high-end cashmere clothing and jewelry at affordable prices.

Apparel wrinkled: Experts said the lack of any major fashion trend and unseasonably warm weather hurt sales of winter apparel this holiday season. Sales at No. 1 clothing seller Gap Inc. slipped 2 percent in November and are likely to be soft in December as well.

Home not so sweet anymore: The biggest loser in the home furnishings sector is likely to be Pier 1 Imports, which posted a dramatic 15.3 percent drop in its November sales.

Love said the sector is much more fragmented as non-traditional players try to take a piece of the home furnishing pie. For instance, Pier 1 has continued to lose market share to discounters such as Wal-Mart and Target which have expanded their presence in the home category.

"This has become a very competitive sector; pure players like Pier 1 are really taking a beating," he said.

-- This is an update of the original story that was published on Dec. 21.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.