Wal-Mart Sales Beat Estimates; Limited Brands Cuts Forecast

Wal-Mart Sales Beat Estimates; Limited Brands Cuts Forecast

Jan. 10 (Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, said December sales climbed 2.4 percent, higher than analysts' estimates. Limited Brands Inc. cut its fourth-quarter profit forecast after sales declined during what may have been the worst holiday season in five years.

Sales at stores open at least a year dropped 8 percent at Limited Brands, the owner of the Victoria's Secret lingerie chain, double the average projection of a 4 percent decline.

A declining number of customers at American Eagle Outfitters Inc. and other retailers led to the reduction in forecasts. Consumers facing $3-a-gallon gasoline and the worst housing market in 27 years reined in spending and only bought items on sale. Stores typically count on November and December for about a fifth of their annual sales.

``It's a very challenging period for the retailers,'' Steven Baumgarten, an analyst at PNC Wealth Management in Philadelphia, with $77 billion in assets including retailers' shares, said on Jan. 8. ``The sales numbers obviously don't look that great, and the promotional activity in most cases was above last year, so margins are probably going to suffer.''

The International Council of Shopping Centers on Jan. 8 said same-store sales in November and December probably increased ``a little under'' its 2.5 percent forecast. Same- store sales are considered a key measure of a retailer's performance because they exclude locations that have recently opened or closed.

Slowing Sales

December sales may have increased at a pace slower than the council's 1.5 percent estimate as shoppers waiting for discounts spent less at the beginning of the month, Michael Niemira, the ICSC's chief economist, said last week. A calendar shift moved a week of holiday sales into November from December, hurting last month's results and helping November post a 3.5 percent increase.

American Eagle, the U.S. retailer of clothes for 15- to 25-year-olds, fell 6 cents to $17.72 yesterday in New York Stock Exchange composite trading. Limited Brands, based in Columbus, Ohio, dropped 4 cents to $15.69. Bentonville, Arkansas-based Wal-Mart climbed 93 cents to $46.90.

The Standard & Poor's 500 Retailing Index rose less than 1 percent to 375.15 yesterday. The index has dropped 8.5 percent this year through yesterday following an 18 percent decline in 2007.

Food, Drugs

Wal-Mart's December gains were driven by sales of food, drugs and electronics. The results were within the company's forecast of a 1 percent to 3 percent gain.

Other retailers also exceeded estimates. Costco Wholesale Corp., the largest U.S. warehouse-club chain. December sales at stores open at least a year rose 7 percent, beating analysts' projections for a 5.5 percent gain.

Target Corp., Macy's Inc. and other retailers were to release results later in the day.

Holiday sales were ``listless'' beyond the day after Thanksgiving and the weekend before Christmas, according to Retail Metrics LLC. Retailers faced a ``lull'' in sales until about Dec. 15 because of poor weather and people waiting for discounts, said Michael McNamara, vice president of research and analysis at MasterCard Advisors.

Thirty-six percent of Americans went shopping between Christmas and the New Year, the lowest level in six years, according to an America's Research Group survey. Of those who shopped last week, 70 percent only bought sale items, the highest percentage in three years, the ARG survey found.

`Conservative American'

``I can't remember uncovering a more conservative American shopper than during this holiday shopping period,'' ARG Chairman Britt Beemer said yesterday in a statement. The poll of 800 consumers was conducted Jan. 4 to Jan. 6.

Limited Brands, which also operates Bath & Body Works, said fourth-quarter profit would be at the ``low-to-mid point'' of its forecast of 90 cents to $1.05 a share, after releasing same-store sales.

The average analyst estimate was for a sales decline of 4 percent, according to Retail Metrics, a Swampscott, Massachusetts-based research firm.

American Eagle's fourth-quarter profit may fall to as low as 64 cents a share from 66 cents a year earlier, the Pittsburgh-based retailer said yesterday. Its December same- store sales dropped 2 percent.

The average analyst estimate was for a decline of 1.9 percent. The retailer had previously forecast profit to rise to 67 cents to 70 cents a share.

Men's Wearhouse

Men's Wearhouse Inc., which operates 1,277 stores, said fewer customer visits hurt sales more than it anticipated, without providing specific figures. The retailer projects ``continued weak traffic trends'' in January. Full-year profit may now be no more than $2.62 a share, down from a previous high of $2.92.

``Retailers have created a bunch of procrastinators waiting for the markdowns they knew were going to come, and they ended up buying at lower margins,'' Sherif Mityas, a Chicago-based partner with consulting firm A.T. Kearney Inc., said Jan. 8.

Hot Topic Inc., an apparel and gift retailer targeting 12- to 22-year-olds, said fourth-quarter profit will be a maximum 29 cents a share, down from a previous high of 33 cents a share. Hot Topic's same-store sales dropped 6.2 percent in December. Analysts estimated a 6.3 percent decline.

BLOOMBERG