Target Corp. (TGT) and Ross Stores Inc. (ROST), operators of wholesale clubs and off-price retail shops, on Thursday reported higher comparable store sales and net sales for the month of December. While Target's same-store sales missed analysts' expectations, that of Ross Stores exceeded their estimates. Meanwhile, Duckwall-ALCO Stores, Inc. (DUCK) also reported an increase in comparable store sales.
Retail sales and store traffic were both negatively impacted during the week ending December 25 primarily due to the calendar shift and inclement weather in the Midwest, Northeast and South regions.
Comparable store sales or comps is a financial metric used by most retailers to measure a sales performance of stores open for at least one year.
Target, which retails general merchandise and food and pet supplies, said its comparable store sales for December increased 0.9%, compared with an increase of 1.8% in the year-ago period. On average, analysts polled by Thomson Reuters expected a 4.0% increase in same-store sales for the month. Target had earlier said it expects a low to mid single-digit increase in comparable store sales for the month of December.
This increase in comparable store sales was driven by growth in average transaction size, combined with a small increase in comparable-store transactions. Target said that grocery, healthcare and beauty as well as apparel drove the growth in comparable store sales for December.
The Minneapolis, Minnesota-based company's net retail sales for December totaled $9.88 billion, up 1.4% from $9.74 billion in the prior-year period.
Target's retail segment includes large general merchandise and food discount stores, and its on-line business, Target.com. The company also operates a credit card segment that offers branded proprietary credit card products.
Target noted that comparable-store sales performance in the month was strongest in grocery, which increased in the low double-digits. Comparable store sales in healthcare and beauty increased in the mid single-digits, while comparable-store sales in apparel increased in the low to mid single-digit range.
Comparable-store sales in hardlines declined in the mid single-digit range, with similar performances across electronics, toys, sporting goods, and music, movies & books. Comparable-store sales in Home in the low single-digit range.
Target noted that its December comparable-store sales performance was better than average in markets in the upper Midwest, central and southern California, Florida and the mid-Atlantic. Comparable-store sales performance was weaker than the rest of the chain in portions of the Southwest and Northeast.
Gregg Steinhafel, chairman, president and chief executive officer of Target Corp. said, "December sales were below expectations, as strength in Grocery and Apparel was offset by softness in Electronics, Toys and some Home categories. Sales in some key gift-giving categories moved earlier into the holiday season, and lower margin items drove a higher portion of sales than expected.
Steinhafel added, "Our 5% REDcard Rewards program is delivering the results we expected, and we're confident that we will continue to generate profitable growth, even while consumer buying patterns exhibit volatility across categories and over time."
For the year-to-date period, Target's comparable store sales rose 2.1%. Net retail sales reached $61.40 billion for the period, up 3.8% from last year.
Looking ahead, Target said it expects a low to mid single-digit increase in comparable-store sales for the month of January.
Based on Target's quarter-to-date sales results and January outlook, the company continues to expect fourth quarter comparable-store sales will increase in the range of 2%-4%.
Target also said it believes that the current median First Call estimate of $1.40 for Target's fourth-quarter earnings per share is a reasonable estimate within a range of possible outcomes, as favorability in the corporation's credit card segment performance and income tax rate are expected to offset a slight decline in its retail segment EBITDA margin rate.
On average, twenty three analysts polled by Thomson Reuters expect the company to report earnings of $1.41 per share for the quarter. Analysts' estimates typically exclude special items.
Pleasanton, California-based Ross Stores reported a 4% increase in comparable store sales for December, which beat analysts' expectations for a 0.5% decline and also exceeded the company's own expectations. The increase in same store sales for the month comes on top of a 12% gain the same period last year.
The company's total sales for the month grew 8% to $1.01 billion from $934 million a year ago.
Michael Balmuth, Vice Chairman and Chief Executive Officer of Ross Stores, said, "We are pleased to report that both sales and margins in December were well ahead of our expectations. These results are especially noteworthy considering the very challenging prior year comparisons. Our continued ability to deliver exceptional bargains, combined with consumers' ongoing focus on value, drove healthy traffic to our stores during the month. Juniors and Dresses were the strongest merchandise categories, while Florida continued to be the top performing market."
For the eleven months ended January 1, 2011, the company's comparable store sales increased 5% on top of a 6% gain in 2009. Sales for the period increased 10% to $7.43 billion from $6.77 billion in the prior-year period.
Looking ahead, Ross Stores raised its earnings per share outlook for the fourth quarter. The company now projects earnings per share for the fourth quarter ending January 29, 2011 in a range of $1.32-$1.34 per share. Earlier, the company had projected earnings for the quarter to be at the high end to somewhat better than its previous guidance range of $1.15-$1.20 per share.
The revised outlook represents a 14% to 16% increase compared to earnings of $1.16 per share in the year-ago period. On average, seventeen analysts polled by Thomson Reuters expect the company to earn $1.22 per share for the quarter. Analysts' estimates typically exclude special items.
Balmuth said, "This updated earnings per share range is based on our actual sales and margin results in November and December along with our continued assumption for a 1% to 2% decline in January same store sales. In addition, our merchants have been able to take advantage recently of a large amount of compelling close-out opportunities in the marketplace."
Abilene, Kansas-based broad line retailer Duckwall-ALCO Stores reported a 1.1% increase in same-store sales for the month of December. The company noted that sales results for the 43 Duckwall stores to be closed in January have been excluded from same-store sales for the period and year-to-date.
The company's sales from continuing operations for the month increased 7.3% to $69.4 million from $64.7 million in the year-ago period.
Rich Wilson, President and Chief Executive Officer of Duckwall-ALCO Stores, commented, "Comparable sales for the critical November and December holiday period increased 2.7%. After a same-store sales decrease for the first six months of the year, we achieved a turnaround in the trend, delivering a 0.4% same-store sales increase from August through December."
The company noted that departments with the strongest performance for December included food and consumables, electronics, apparel, small appliances and housewares. Departments performing lower than company trend included toys, home decor, stationery, and shoes.
For the year-to-date period, the company's same-store sales decreased 2.5%, while net sales declined 0.5% to $447.1 million.
In mid-December, the National Retail Federation or NRF revised its holiday sales forecast to a growth of 3.3% to $451.5 billion, up from the original 2.3% expected increase.
November and December form the peak holiday season in the U.S. when many people spend on Christmas gifts and other items. Consumer spending accounts for about 70% of the U.S. economy, and holiday sales generate about 30% of annual revenue for retailers.
Consumer sentiment in the U.S. showed a notable improvement in December compared to the previous month, Reuters and the University of Michigan revealed in a report in December, although their final reading on consumer sentiment for the month came in below economists' estimates.
In Thursday's regular trading session, TGT is trading at $55.49, down $3.45 or 5.85% on a volume of 4.09 million hares. ROST is trading at $64.16, up $1.51 or 2.41% on a volume of 0.30 million shares. DUCK is trading at $13.07, down $0.14 or 1.06% on a volume of 100 shares.
For comments and feedback: editorial@rttnews.com