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Was the Holiday Season a Blissful One for Retailers?
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Holiday season and retail are synonymous, and with festive season almost over, it’s time to analyze the retailers’ performance. Notably, retailers stay on their toes during this busiest part of the year, flooding the market with offers and promotions. They sweep buyers off their feet with early-hour store openings, huge discounts, promotional strategies, and free shipping on online purchases. Since the season accounts for a sizeable chunk of yearly revenues and profits, retailers grab every opportunity to drive footfall.
Best Holiday Sales Since 2011
The holiday season was the best in few years, as cash registers at stores jingled as much as online channels, letting the retailers rejoice. According to MasterCard SpendingPulse, sales (excluding automobiles) during the November/December period jumped 4.9% compared with 3.7% rise in the prior-year period. This marks the biggest year-over-year increase in holiday spending since 2011.
Per report, sales of electronics and appliances, jewelry, and home furnishings rose 7.5%, 5.9% and 5.1%, respectively. Meanwhile, specialty apparel as well as department stores witnessed “moderate” sales increase. The data by MasterCard SpendingPulse fared better than the National Retail Federation (“NRF”) projection of 3.6-4% rise in November and December sales (excluding autos, gas and restaurant sales) and eMarketer forecasts 3.1% jump in holiday sales.
Retailers’ Scorecard
Discount Retailers — Target & Costco
The two major discount retailers Costco Wholesale Corporation (COST - Free Report) and Target Corporation (TGT - Free Report) impressed investors with stellar comparable sales performance. Target reported comparable sales growth of 3.4% for the November and December period driven by robust traffic growth and unrelenting strength in digital sales. Following, robust comps performance this Zacks Rank #3 (Hold) company raised fourth quarter and fiscal 2017 earnings guidance. The company now expects fourth-quarter earnings per share in the band of $1.30 to $1.40, up from the prior guided range of $1.05 to $1.25. For the full year, Target anticipates adjusted earnings per share in the range of $4.64 to $4.74, compared with the prior estimate of $4.40 to $4.60.
Meanwhile, Costco continued with its solid comparable-store sales (comps) trend in the month of December as well. Comps for five-week ended Dec 31, 2017 increased 11.5%, following an increase of 10.8% in November. We believe that the hike in annual membership fees and higher penetration of Citi Visa co-brand card program are benefiting the company. We are also encouraged by this Zacks Rank #3 (Hold) company’s expansion strategy, as it remains committed to opening new clubs and expanding e-commerce capabilities.
Departmental Store Retailers — Kohl’s, Macy’s, JC Penney
Kohl's Corporation (KSS - Free Report) holiday sales numbers were most impressive among the departmental stores retailers. Both comps and total sales advanced 6.9% year over year, for the combined November and December period. Notably, this marks a significant improvement from a 2.1% and 2.7% respective drop in comps and total sales witnessed in the 2016 holiday season. We believe that sustained focus on technology improvements and omni-channel expansion is likely to fuel further growth at Kohl’s. In fact, this Zacks Rank #3 company’s better-than-expected holiday performance and optimistic vision for January encouraged management to raise fiscal 2017 earnings outlook from $3.72-$3.92 to $4.10 to $4.20 per share.
Meanwhile, J. C. Penney Company, Inc. reported positive comps this festive season, unlike the prior year. It delivered comps growth of 3.4% for the combined nine weeks period, ending on Dec 30, 2017. Robust comps performance was driven by solid sales at home, beauty and fine jewelry. It was also fueled by this Zacks Rank #3 company’s sturdy e-commerce business that recorded double-digit sales increase year over year.
Meanwhile, despite taking a slew of measures to improve performance Macy’s, Inc.’s (M - Free Report) holiday sales numbers improved modestly. Comparable sales on an owned plus licensed basis increased 1.1% during November and December period combined, while on an owned basis, the same inched up 1%. Following modest increase in holiday sales, this Zacks Rank # 2 (Buy) company narrowed its sales guidance. The company now expects sales for fiscal 2017 on an owned basis to decline between 2.4% and 2.7%, compared with the prior guided range of decrease by 2.2-3.3%.
Lululemon Athletica Inc. (LULU - Free Report) was also among the retailers that emerged strong this holiday season driven by accelerating trends witnessed across all parts of its businesses. This prompted management to lift its fiscal 2017 guidance. This Zacks Rank #2 company now expects adjusted earnings per share in the band of $1.25-$1.27, up from the earlier guided range of $1.19-$1.22.
Urban Outfitters, Inc. (URBN - Free Report) disclosed holiday sales numbers, wherein comparable retail segment net sales, including the comparable direct-to-consumer channel, gained 2%. For the month of November and December comparable retail segment net sales rose 1% at Urban Outfitters, 5% at Free People and 2% at the Anthropologie Group. Gain in comparable retail sales were driven by double-digit growth in the direct-to-consumer channel. Despite reporting year-over-year increase in holiday sales, the stock came under pressure primarily due to lower-than-expected comps. In early December, the company in a filing stated that “Thus far during the fourth quarter of fiscal 2018, comparable Retail segment net sales are mid-single-digit positive”. However, comps for the November and December increased by low-single digit, which gives an indication that the company failed to carry its initial momentum in the latter part of holiday season.
However, we believe new store openings, increase in direct penetration, growing wholesale operations and merchandising improvements bode well for the long term. Management is also making all possible efforts to enhance the performance of brands through store refurbishment and by bringing in more compelling assortments. The company currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Wrapping Up
From the above discussion it is clear that quite a few retailers had a wonderful holiday season. Based on the performance we are quite optimistic about retailers’ fourth-quarter results. Per the Earnings Trends, the total earnings for Retail/Wholesale sector are likely to witness a growth of 3.9% in the fourth quarter, while revenues are estimated to rise 8.4%.
Retail/Wholesale, which currently occupies top 19% (3 out of 16) position among the Zacks Classified sectors has surged 34.5% in a year, outperforming the S&P 500 growth of 23.9%.
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Was the Holiday Season a Blissful One for Retailers?
Holiday season and retail are synonymous, and with festive season almost over, it’s time to analyze the retailers’ performance. Notably, retailers stay on their toes during this busiest part of the year, flooding the market with offers and promotions. They sweep buyers off their feet with early-hour store openings, huge discounts, promotional strategies, and free shipping on online purchases. Since the season accounts for a sizeable chunk of yearly revenues and profits, retailers grab every opportunity to drive footfall.
Best Holiday Sales Since 2011
The holiday season was the best in few years, as cash registers at stores jingled as much as online channels, letting the retailers rejoice. According to MasterCard SpendingPulse, sales (excluding automobiles) during the November/December period jumped 4.9% compared with 3.7% rise in the prior-year period. This marks the biggest year-over-year increase in holiday spending since 2011.
Per report, sales of electronics and appliances, jewelry, and home furnishings rose 7.5%, 5.9% and 5.1%, respectively. Meanwhile, specialty apparel as well as department stores witnessed “moderate” sales increase. The data by MasterCard SpendingPulse fared better than the National Retail Federation (“NRF”) projection of 3.6-4% rise in November and December sales (excluding autos, gas and restaurant sales) and eMarketer forecasts 3.1% jump in holiday sales.
Retailers’ Scorecard
Discount Retailers — Target & Costco
The two major discount retailers Costco Wholesale Corporation (COST - Free Report) and Target Corporation (TGT - Free Report) impressed investors with stellar comparable sales performance. Target reported comparable sales growth of 3.4% for the November and December period driven by robust traffic growth and unrelenting strength in digital sales. Following, robust comps performance this Zacks Rank #3 (Hold) company raised fourth quarter and fiscal 2017 earnings guidance. The company now expects fourth-quarter earnings per share in the band of $1.30 to $1.40, up from the prior guided range of $1.05 to $1.25. For the full year, Target anticipates adjusted earnings per share in the range of $4.64 to $4.74, compared with the prior estimate of $4.40 to $4.60.
Meanwhile, Costco continued with its solid comparable-store sales (comps) trend in the month of December as well. Comps for five-week ended Dec 31, 2017 increased 11.5%, following an increase of 10.8% in November. We believe that the hike in annual membership fees and higher penetration of Citi Visa co-brand card program are benefiting the company. We are also encouraged by this Zacks Rank #3 (Hold) company’s expansion strategy, as it remains committed to opening new clubs and expanding e-commerce capabilities.
Departmental Store Retailers — Kohl’s, Macy’s, JC Penney
Kohl's Corporation (KSS - Free Report) holiday sales numbers were most impressive among the departmental stores retailers. Both comps and total sales advanced 6.9% year over year, for the combined November and December period. Notably, this marks a significant improvement from a 2.1% and 2.7% respective drop in comps and total sales witnessed in the 2016 holiday season. We believe that sustained focus on technology improvements and omni-channel expansion is likely to fuel further growth at Kohl’s. In fact, this Zacks Rank #3 company’s better-than-expected holiday performance and optimistic vision for January encouraged management to raise fiscal 2017 earnings outlook from $3.72-$3.92 to $4.10 to $4.20 per share.
Meanwhile, J. C. Penney Company, Inc. reported positive comps this festive season, unlike the prior year. It delivered comps growth of 3.4% for the combined nine weeks period, ending on Dec 30, 2017. Robust comps performance was driven by solid sales at home, beauty and fine jewelry. It was also fueled by this Zacks Rank #3 company’s sturdy e-commerce business that recorded double-digit sales increase year over year.
Meanwhile, despite taking a slew of measures to improve performance Macy’s, Inc.’s (M - Free Report) holiday sales numbers improved modestly. Comparable sales on an owned plus licensed basis increased 1.1% during November and December period combined, while on an owned basis, the same inched up 1%. Following modest increase in holiday sales, this Zacks Rank # 2 (Buy) company narrowed its sales guidance. The company now expects sales for fiscal 2017 on an owned basis to decline between 2.4% and 2.7%, compared with the prior guided range of decrease by 2.2-3.3%.
Apparel Retailers – Lululemon Athletica & Urban Outfitters
Lululemon Athletica Inc. (LULU - Free Report) was also among the retailers that emerged strong this holiday season driven by accelerating trends witnessed across all parts of its businesses. This prompted management to lift its fiscal 2017 guidance. This Zacks Rank #2 company now expects adjusted earnings per share in the band of $1.25-$1.27, up from the earlier guided range of $1.19-$1.22.
Urban Outfitters, Inc. (URBN - Free Report) disclosed holiday sales numbers, wherein comparable retail segment net sales, including the comparable direct-to-consumer channel, gained 2%. For the month of November and December comparable retail segment net sales rose 1% at Urban Outfitters, 5% at Free People and 2% at the Anthropologie Group. Gain in comparable retail sales were driven by double-digit growth in the direct-to-consumer channel. Despite reporting year-over-year increase in holiday sales, the stock came under pressure primarily due to lower-than-expected comps. In early December, the company in a filing stated that “Thus far during the fourth quarter of fiscal 2018, comparable Retail segment net sales are mid-single-digit positive”. However, comps for the November and December increased by low-single digit, which gives an indication that the company failed to carry its initial momentum in the latter part of holiday season.
However, we believe new store openings, increase in direct penetration, growing wholesale operations and merchandising improvements bode well for the long term. Management is also making all possible efforts to enhance the performance of brands through store refurbishment and by bringing in more compelling assortments. The company currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Wrapping Up
From the above discussion it is clear that quite a few retailers had a wonderful holiday season. Based on the performance we are quite optimistic about retailers’ fourth-quarter results. Per the Earnings Trends, the total earnings for Retail/Wholesale sector are likely to witness a growth of 3.9% in the fourth quarter, while revenues are estimated to rise 8.4%.
Retail/Wholesale, which currently occupies top 19% (3 out of 16) position among the Zacks Classified sectors has surged 34.5% in a year, outperforming the S&P 500 growth of 23.9%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>