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Holiday profit seen higher as U.S. stores limit deals

By Chris Burritt, Cotten Timberlake and Lauren Coleman-Lochner , Bloomberg

December 27, 2012 • Reprints

Washington and Hurricane Sandy weren’t able to ruin everything for retailers this year.

While one estimate put holiday sales gains at only 0.7 percent, retailers from Macy’s Inc. to Abercrombie & Fitch Co. controlled inventories heading into the holidays, enabling them to limit discounts.

Analysts estimate earnings per share for consumer-discretionary retailers in the Standard & Poor’s 500 Index will increase about 13 percent in the fourth quarter, according to data compiled by Bloomberg as of Dec. 21. A year earlier, profit slipped 3.4 percent on a share-weighted basis.

“The retailers coming out of the holiday season on top have done an excellent job with their inventories,” Megan Donadio, a New York-based retail strategist for consulting firm Kurt Salmon, said yesterday in a telephone interview. “They’ve planned promotions carefully to ensure profitability.”

Retailers are increasingly using sophisticated analytics in planning promotions, deciding how much to order based on previous sales and industrywide demand, Donadio said. Most chains secured holiday goods months before Sandy hit in October, reducing the harm from power failures and transportation interruptions in the Northeast.

Consumers also have been resilient. While Republicans and Democrats have been unable to agree on a plan to avoid federal spending cuts and tax increases of $600 billion that would come into effect in January without action by Congress, the Bloomberg Consumer Comfort Index was little changed at minus 32.1 in the period ended Dec. 23, near a four-year high.

Fewer Deals

Ewing Concepcion, a 21-year-old student at Merrimack College in North Andover, Massachusetts, said he spent more this holiday season while snagging fewer deals.

“I paid full price for a lot of stuff this year,” Concepcion said while shopping yesterday at the Mall at Rockingham Park in Salem, New Hampshire.

Retailers have gotten better at managing their inventories in recent years, keeping them from having to resort to steep discounts to prevent merchandise from piling up. The improvement will show up in a company’s gross margin, or the portion of sales left after subtracting the cost of goods.

Retailers projected to have wider gross margins this season include Ralph Lauren Corp., whose gross margin may expand to 59.2 percent of sales in the quarter ending Dec. 31 from 57.1 percent in the same period a year ago, according to the average of five analysts’ estimates compiled by Bloomberg.

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Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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Bloomberg 5254financials 2975Standard & Poor 2008Congress 1894Economy 1513New York 841Illinois 599Massachusetts 585Reports 345Retail sales 126Retail 89Wal-Mart Stores Inc. 72New Hampshire 64MasterCard 49Consumer spending 44Abercrombie & Fitch Co. 20Sears Holdings Corp. 19Coach Inc. 12VF Corp. 6Kmart 5apparel maker 5International Council of Shopping Centers 5Ralph Lauren Corp. 4Michael Niemira 3holiday spending 1Outlet Stores Inc. 1Gander Mountain Co. 1WSL Strategic Retail 1transportation interruptions 1Merrimack College 1Ewing Concepcion 1Candace Corlett 1Jackwyn Nemerov 1Megan Donadio 1Bob Shearer 1Ron Boire 1Sandy Spending 1

Free Newsletter Modern Trader Follow

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