(JCP) U.S. Holiday Preview – National Retail Federation

The National Retail Federation (“NRF”), an industry trade group, projects a 2.8% growth in sales, amounting to $465.6 billion, during the current November to December holiday season, lower than the 5.2% rise in the corresponding period of the previous year. Online retail may increase 15% to touch $37.6 billion. These estimates reveal a rebound in consumer expenditure, which amounts to about 70% of the U.S. economy.

Brick-and-mortar retailers ran extended hours post Thanksgiving in order to snatch some business from Internet retailers who continue to grow at a brisk pace. The growth trajectory of online sellers remains intact despite huge destruction of consumer wealth during the financial crisis in 2008 and tepid recovery since then.

On the other hand, retail icons for middle-class shoppers, J. C. Penney Company (JCP) and Sears (SHLD), struggle to lure customers even with plenty of loss leaders. At the same time, many stores at both ends of the brand spectrum, discount and up-market retail outfits, are witnessing brisk business.

In line with its performance in the past three years, the behemoth of online retailing, Amazon.com (AMZN) continued to grow sales at a scorching pace in the third quarter. However, its future earnings will be dampened by investments in a higher number of fulfillment centers.

Macy’s (M) latest quarterly earnings handily beat the Zacks Consensus Estimate partly buoyed by robust online sales (at macys.com, bloomingdales.com), which were up 39.8% in the most recent quarter. Reflecting its renewed optimism, the company recently raised its 2011 earnings per share to a higher range of $2.70 to $2.75 from $2.60 to $2.65 earlier.

Among the middle-of-the-road retailers, Sears reported a higher-than-expected adjusted loss for the reported quarter on lower-than-anticipated sales. J.C. Penney recently stated mixed results with  a year-over-year drop in both earnings and revenues.

These, traditional retail bastions have experienced scant growth in sales over the past 3 years and often provided negative returns to their shareholders. Wal-Mart (WMT) lately reported an in-line earnings quarter on higher-than-expected sales; yet this bellwether of the American economy has mostly failed to beat the equity market over the last couple of years.

Nordstrom (JWN), which provides a quintessential up-market shopping experience, continues to do well with forecast-beating earnings per share on surging sales, in the latest quarter. Consequently, the company has lifted its earnings guidance for the current fiscal year. Other boutiques that fared well, include Coach (COH) and Limited Brands (LTD), which also recently improved their earnings outlook for the on-going financial year.

In congruence with robust past performance, deep discount chains, such as Dollar General Corporation (DG), the largest retailer in the country, and Family Dollar Stores (FDO), are expected to continue to do well this Holiday Season and beyond. Bed Bath & Beyond (BBBY), which operates specialty retail stores with “everyday low prices” reported 10 straight quarters of improving trend and its earnings per share rose 33% year over year in the most up-to-date quarter. Big Lots (BIG), with its close-out format for discount retail, issued slightly higher earnings guidance on flattish (to slightly down) same-store sales for fiscal 2011.

Retailers have by and large put in a middle-of-the road performance since the financial crisis in 2008. The outlook though not very encouraging because of stubbornly high unemployment levels and deleveraging efforts of the average American consumer, looks positive for high-end and deep discount retail.

AMAZON.COM INC (AMZN): Free Stock Analysis Report

BED BATH&BEYOND (BBBY): Free Stock Analysis Report

BIG LOTS INC (BIG): Free Stock Analysis Report

COACH INC (COH): Free Stock Analysis Report

DOLLAR GENERAL (DG): Free Stock Analysis Report

FAMILY DOLLAR (FDO): Free Stock Analysis Report

PENNEY (JC) INC (JCP): Free Stock Analysis Report

NORDSTROM INC (JWN): Free Stock Analysis Report

LIMITED BRANDS (LTD): Free Stock Analysis Report

MACYS INC (M): Free Stock Analysis Report

SEARS HLDG CP (SHLD): Free Stock Analysis Report

WAL-MART STORES (WMT): Free Stock Analysis Report

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