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Tough holiday for retailers
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January 4, 2001: 2:15 p.m. ET
Holiday sales edge up for Wal-Mart, Kmart, but fall for Penney, Sears
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NEW YORK (CNNfn) - Major retailers reported disappointing December sales Thursday, as a struggling economy and bad weather added up to a slower holiday shopping period.
Wal-Mart Stores Inc., the world's top retailer, said Thursday sales at stores open a year or more, a commonly used measure called same-store sales, increased just 0.3 percent, far lower than the 9.1 percent jump last year.
For Wal-Mart stores alone, same-store sales rose slightly, while sales at Sam's Club warehouse outlets edged lower.
Even with disappointing sales, Wal-Mart said in a pre-recorded sales call that its fourth-quarter earnings "should be above" last year's results of 43 cents per share. Analysts polled by First Call are expecting earnings of 46 cents per share.
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December was a disappointing month in what has been a difficult year.
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Millard Drexler
Gap president and CEO |
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Despite a last-minute rush for holiday gifts, many retailers expected December sales to fall short of forecasts as consumers cut back on spending.
Credit Suisse First Boston retail analyst Michael Exstein said consumer reluctance to spend and an absence of hot items this holiday season hurt sales figures.
"I think you have a satiated consumer, you've got a consumer that's facing an increasing debt load and I think there wasn't a lot interesting short of the scooters this Christmas season," Exstein said.
Shares of Wal-Mart (WMT: Research, Estimates) fell $2.25, nearly 4 percent, to $56.19 Thursday.
Same-store sales for Kmart edged up 0.7 percent. Net sales were $6.06 billion, down from the year-earlier period -- Kmart had 71 fewer stores for the recent holiday period.
Kmart (KM: Research, Estimates) shares rose 75 cents to $6.19.
Exstein said retailers need to cut capital spending and work on expenses, so they are not so reliant on sales for earnings per share.
"I don't think the Fed's interest rate cut in the short term helps the retailers or helps the consumers to spend more but I certainly think it begins to stabilize the environment," he added.
Sales drop at Penney's, Sears, Gap
Same-store sales at clothing retailer Gap Inc. plunged 6 percent, much lower than last year's results, and the company said it could miss fourth-quarter estimates.
"December was a disappointing month in what has been a difficult year," said Millard Drexler, Gap president and CEO, in a statement. "Our sales were driven primarily by price, not product, which significantly affected our margins."
"We've made our own mistakes, but the retail environment has also changed dramatically in the past year," Drexler said.
The company said while it sees the First Call fourth-quarter earnings estimates of 36 cents per share as "achievable," a tougher market could shave that figure by 3 to 5 cents per share.
Shares of Gap (GPS: Research, Estimates) were unchanged cents at $30.31.
Retailer J.C. Penney said total sales fell 1.5 percent to $4.66 billion in the five weeks ended Dec. 30. Same-store sales at its flagship department stores dropped 1.6 percent.
J.C. Penney (JCP: Research, Estimates) slipped 81 cents to close at $29.50.
 Sears, Roebuck & Co. also saw same-store sales drop during the holidays and announced it would be closing 89 underperforming stores.
About 2,400 workers will be laid off as a result, less than 1 percent of Sears' total work force.
For the five weeks ended Dec. 30, same-store sales were down 1.1 percent.
The company will shut 53 National Tire and Battery stores, 30 hardware and four full-line stores by the end of the first quarter 2001. Sears is also considering options for its termite and pest control business.
Sears (S: Research, Estimates) rose 40 cents to $36.43.
Target to hit earnings bulls eye
Target Corp. said it would be on target for fourth-quarter and year earnings, even though its holiday same-store sales dropped 0.1 percent.
"While December sales were disappointing, with below-plan performance at all three of our divisions, we continue to expect growth in fourth-quarter earnings per share," said Bob Ulrich, Target chairman and CEO, in a statement. "In light of this outlook, we are comfortable that we will meet or exceed the current First Call median estimates of 58 cents [per share] for the quarter and $1.36 [per share] for the year."
Net sales of the five weeks ended Dec. 30 were $6.092 billion.
Target (TGT: Research, Estimates) rose 69 cents to $36.94.
Some good news
Same-store sales for department store operator Kohl's Corp. jumped 14.8 percent compared to last year's holiday period.
The company said Thursday it plans to open 55 go 60 new stores in 2001. Kohl's (KSS: Research, Estimates) jumped $6.19 to $70.
Toys "R" Us Inc.'s holiday same-store sales rose 3.5 percent.
Shares of Toys "R" Us (TOY: Research, Estimates) soared $4.12, or 22 percent, to $22.62.
Two clothing retailers, Intimate Brands and The Limited, also reported disappointing holiday sales, and both warned about fourth-quarter earnings.
On Wednesday, Federated Department Stores, Walgreen Co. and Family Dollar Stores all reported disappointing same-store sales for December. 
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