NEW YORK (CNN/Money) -
Wal-Mart's upside sales surprise, strong results from luxury retailers and better-than-expected performance from specialty apparel stores suggested Thursday that Santa came through for retailers in the holiday season.
"Wal-Mart's numbers are definitely a good sign for the group, especially since they had low-balled their figures all month," said Ken Perkins, retail analyst with Thomson Financial. "The indications are that the holidays were probably OK or even better than we thought."
"December showed a marked improvement from October and December," said Perkins, adding that the aggregate December comparable sales rose 4.2 percent for the month compared to forecasts for a much smaller 3.4 percent rise.
Industry observers gave credit to holiday procrastinators for providing the booster shot that spurred last-minute sales after two weekend snowstorms in early December kept shoppers at home.
"Clearly the last 10 days before Christmas were very strong and allowed retailers to achieve their sales plans for the month despite the lack of aggressive promotions we saw in 2002," said Bill Dreher, analyst with Deutsche Bank Securities.
"In the game of chicken between retailers and consumers, with one looking to improve profit margins and the other holding out for discounts, it would appear that the consumer blinked," Dreher said. "The initial read on the fourth quarter is that profits should come in better than anticipated."
Wal-Mart spreads the cheer
Wal-Mart Stores Inc. said sales at stores open a year or more rose 4.3 percent in December as buying picked up in the later half of the month.
Wal-Mart, the world's largest retailer by revenue, last month indicated that even though sales and traffic had picked up right before Christmas, it might not have been enough to push sales above the low end of its guidance of a 3 to 5 percent gain for the month.
In a recorded sales message, Wal-Mart (WMT: Research, Estimates) said food, infant products, pharmacy and toys were among the strongest performing categories.
For January, Wal-Mart said it expects comparable sales to be up in the 3 to 5 percent range.
However, the retailer said its fourth-quarter guidance is tracking near the low end of its previous forecast of a profit of between 63 to 65 cents a share.
Dreher thinks part of the reason for the cautious guidance is that Wal-Mart's apparel inventory looked heavy in the post-Christmas period. "We saw this happen when Wal-Mart back in the 1990's made its push into the grocery business. It put pressure on margins and returns," he said. "The retailer is in an apparel investment phase right now and we think it will become a major force in the national branded apparel market in the future."
Penney surprises; luxury strong
Department store chain J.C. Penney (JCP: Research, Estimates) said comparable department store sales rose 4.3 percent, while Federated Department Stores, owner of Macy's and Bloomingdales, said its same-store sales grew 1.2 percent for the month. Both companies cited last-minute shopping for the gains.
As expected, upscale merchants raked in big numbers. The belief is that a strong stock market, tax breaks over the summer and the mortgage refinancing trend all contributed to more wealth in the wallet, especially for upper-income consumers.
Tiffany & Co. (TIF: Research, Estimates) said same-store sales rose 16 percent, while Nordstrom (JWN: Research, Estimates) turned in a 9.1 percent increase .
Wholesale clubs were winners. Costco (COST: Research, Estimates) reported Wednesday same-store sales rose 11 percent in December, beating analysts estimates of a 9.5 percent rise, while closeout retailer Big Lots (BLI: Research, Estimates)' sales increased 6.2 percent.
However, analysts pointed out that both companies also benefited from relatively easy comparisons from a year earlier of a 3 percent gain for Costco and a 0.8 percent gain for Big Lots.
Analysts said the performance from specialty apparel was the icing on the cake.
The standouts last month were women's clothier Chico's FAS (CHS: Research, Estimates), which posted same-store sales up a record 24.3 percent. Ann Taylor (ANN: Research, Estimates) said its same-store sales jumped 26.2 percent and the company boosted its fourth-quarter profit forecast for the second time.
Teen apparel retailer Hot Topic (HOTT: Research, Estimates), whose sales also have been on fire for most of last year, said same-store sales last month rose 10.1 percent. The company also boosted its fourth-quarter profit target by 2 cents to 44 cents a share.
Aeropostale (ARO: Research, Estimates) posted a 5.7 percent rise in sales. "We were very pleased with the results of the holiday sales period. Our merchandising and promotional strategies were successful and we believe that we are well-positioned for the transition to our spring season," Aeropostale CEO Julian Geiger, said in a statement.
Limited Brands (LTD: Research, Estimates) said its sales grew 6 percent, although comparable sales at its Victoria's Secret intimate apparel division fell 5 percent.
But a few disappointments marred the overall positive picture. Toys 'R' Us (TOY: Research, Estimates) said its total holiday sales fell 4.9 percent as the specialty toy retailer struggles with an fiercely competitive environment.
Department store chain Kohl's (KSS: Research, Estimates), said in a statement that it was "very disappointed" with its December performance after its same-store sales fell 1.2 percent. It also cut its fourth-quarter outlook.
Clothing chains American Eagle Outfitters (AEOS: Research, Estimates) said its consolidated comparable sales, including its namesake stores and Bluenotes/Thriftys outlets. fell 5.7 percent, while troubled youth apparel retailer Abercrombie & Fitch (ANF: Research, Estimates) said sales tumbled 13 percent.