Retail Sales Weak On Sandy Impact; Holidays On Track

Retailers reported weak November revenues Thursday, as solid Black Friday weekend sales weren't enough to overcome the havoc wrought by Superstorm Sandy. But holiday gift buying should be solid, analysts said.

Sales at stores open at least a year rose 1.6% vs. a year ago, says Ken Perkins, president of Retail Metrics. Analysts had forecast a rise of already lowered views for 3.5%. The results exclude drugstore chains. Seventy-four percent missed views.

Retail stocks were losers on a strong market day, accounting for the five worst groups among IBD's 197 industries.

Sales weakness was across the board. Giant department store operator Macy's (NYSE:M) comps slid 0.7% vs. forecasts of a 2.5% rise. Despite the largest Thanksgiving volume in its history, Macy's wasn't able to overcome Sandy's impact earlier in the month.

Midtier department store Kohl's (KSS) same-store sales fell 5.6% vs. a year ago, well below views for a 2.1% rise. Discount giant Target (TGT) saw comps fall 1%, vs. views for a 2.1% increase. High-end department store Nordstrom's (JWN) comps sank 1.1%. Analysts expected a 4.5% gain.

Comps rose modestly at Gap (GPS) and off-price Ross Stores (ROST), but less than analysts expected.

Perkins blamed one-time factors for November's retail woes.

"The softness was more a reflection of the disruption from Hurricane Sandy, which hindered sales in the first half of the month at least," he said. "Throw in a hotly contested presidential election .. . and you have a lot of noise in the numbers.

But the month brought some cheer for a few retailers. Costco Wholesale (COST) was a standout with a 6% same-store sales rise, slightly above forecasts. Victoria's Secret parent Limited Brands (LTD) came in with comps up 5%, past views for a 3.4% gain.

Specialty apparel was the strongest sector with a 3.2% pop in comps. Department stores were the weakest with a 2.1% drop.

Still, Perkins says November sales would have come in mainly in line with forecasts if retailers didn't have to contend with the disruption from Sandy.

Shoppers heading into the holiday are "slightly more upbeat" than last year, he says. Consumer confidence in November hit its highest level since February 2008, the job market has improved a bit, home prices are rising and gas prices have fallen.

The past several years, there's been a shopping "lull" from the end of Black Friday weekend through at least the second Saturday before Christmas, he says.

But overall December sales are likely to be strong, says Michael Niemira, chief economist at the International Council of Shopping Centers. He expects comps next month to rise 4% to 4.5%.

While he expects soft spending over the next few weeks, retailers are likely to see procrastinators catching up on gift buying the last two weeks before Christmas.

"I'm expecting a very strong end to the season," he said.

Aside from the Sandy "drag," consumers are still spending at the same pace they have been the past few months, he adds.

He expects November-December same-store sales to rise 3% from last year, slightly less than last year's 3.3% rise.