Retailers cut forecasts as December discounts hurt profits

Stocks Decline

Pier One, based in Fort Worth, Texas, said profit per share in the quarter through February would be 47 cents to 52 cents, down from a previous forecast for profit of at least 60 cents a share. Analysts estimated 61 cents, on average.

Family Dollar fell 7% to $61.64 at 10:50 a.m. in New York. L Brands, based in Columbus, Ohio, slipped 4.8% to $57.32. Pier 1 slumped 13% to $20.36.

Retailers offering such large promotions risk training their customers to only shop when they see a big discount, said Paula Rosenblum, a Miami-based managing partner at Retail Systems Research.

“The challenge for retailers now is they’ve created a trend and now they have to find a way out of it,” Rosenblum said in a phone interview. “That’s going to be a big conversation in boardrooms soon -- can we scale them back.”

One company bucking the trend is Macy’s Inc., which yesterday forecast earnings for its next fiscal year that was higher than analysts’ estimated. Profit per share in the year through January 2015 will be $4.40 to $4.50, the Cincinnati- based company said in a statement. Analysts projected $4.36.

Macy’s Forecast

Chief Executive Officer Terry Lundgren has kept profit growing by adding competitively priced exclusive merchandise and letting lower-level managers tailor assortments to local tastes. He’s also increased online sales by fulfilling Web orders from store inventory.

Macy’s advanced 7.8% to $55.88. The stock jumped 37% last year.

U.S. retail sales rose 2.7% in November and December, the smallest increase since 2009, Chicago-based researcher ShopperTrak said yesterday.

Same-store sales for the more than 10 retailers tracked by Swampscott, Massachusetts-based Retail Metrics rose 3.6% in December from a year earlier, exceeding the average estimate of analysts’ for a 2.6% gain. This excludes results from Gap Inc., the largest U.S. specialty retail chain, which will report December sales after the close of trading.

Customer traffic in November and December declined 15% from the same period a year earlier, ShopperTrak said in a statement. Consumers spent $265.9 billion, resulting in a larger sales gain than the 2.4% increase ShopperTrak had predicted. Holiday sales have risen at least 3% every year since declining 1.2% in 2009.

U.S. retail sales rose 3.5% during November and December this year, led by children’s apparel and jewelry, MasterCard Advisors SpendingPulse said. The National Retail Federation reiterated on Dec. 12 its prediction that total sales will rise 3.9% in November and December, more than the 3.5% gain a year ago.

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