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  • Most retailers reported comp store sales results in December 2010 that were generally -200 Bps to -300 Bps less than November 2010.
  • It’s worth noting that discounters generally blamed weather for relatively weak comp store sales results a year ago. This year, BJ (BJ) suggested that comp store sales in December 2010 received a weather boost of +100 Bps versus LY.
  • We’ve only noted a few retailers: Limited (LTD), New York & Company (NWY), Pier 1 Imports (PIR) that specifically disclosed their merchandise margins were greater than LY in December 2010. LTD’s improvement versus LY may be a function of a major sale event shift.
  • Comp sales math indicates that Buckle (BKE) reported a -2.5% average unit retail [AUR] in December 2010 versus LY. This appears to be a reversal of trend as BKE has been one of the few retailers consistently reporting a higher AUR over the past 12 months. Heavy markdowns may have driven the company’s better than expected top-line performance in December 2010.
  • Don’t companies remember what they said a year ago? One would think so.

A year ago, Costco (COST) suggested that the “estimated negative impact to comparable store sales results from poor weather conditions” was approximately -50 Bps in December 2009. This year, the company suggests a -100 Bps impact to its comp store sales.

On the other hand, BJ suggests that the situation is more favorable, and boosted its comp store sales by +100 Bps this year versus LY.

So, who do you believe? BJ or COST? We’re going with the former and not the latter.

We would advise the folks at COST that if they’re going to utilize the weather excuse, they should go back to last year’s transcript and double-check what faux excuse they used a year ago.

  • Ross Stores (ROST) delivered an impressive upward EPS guidance revision in Q4 2010 to match their impressive sales growth. We’re forecasting additional EPS upside in Q4 2010 to be announced next month.
  • Target (TGT) management talked a big game in mid-November. They talked such a big game that we even cowered a bit on our less than consensus Q4 2010 EPS forecast.

Today, the company needs its credit operation and a favorable tax rate to hit the consensus estimate of $1.40.

The fact is that BJ has consistently delivered stronger comp store sales results this fiscal year (ex-fuel) and delivered stronger results in December 2010 as well… minus the Red Card! The company should have received a top-line boost this year via favorable weather (see BJ). Weak.

Next year’s EPS estimates for TGT are materially too high. Despite relatively strong comp store sales, the retail division’s EBIT margin decline is cause for longer-term concern.

  • Urban Outfitter's (URBN) comp store sales results in November/December 2010 may not be as strong as advertised. Historically, URBN has reported comp store sales on a ‘calendar’ basis as opposed to a ‘retail’ basis. Therefore, the company received a benefit in December this year via an additional Friday in December 2010 versus LY (one less Tuesday).

Note the press release at Destination Maternity Corporation (DEST) that suggests that this particular calendar shift boosted their comp store sales by +90 Bps in December 2010.

That said, the company’s 3-year comp sales run rate still decelerated to +9% in the 2-month Holiday period versus +14% in Q3 2010.

  • Our Compology this month is measuring relative top-line strength/weakness by comparing November 2010 comp store sales versus October 2010.

The following retailers reported a relatively stronger comp store sales result in December 2010 versus November 2010 (relative strength/improving trend):
SKS
(+6.5% improvement in December 2010 versus November 2010)
JWN (+3.3% improvement in December 2010 versus November 2010)
HOTT (+0.4% improvement in December 2010 versus November 2010)
SSI (-0.5% decline in December 2010 versus November 2010)
DDS (-1.0% decline in December 2010 versus November 2010)

The following retailers reported a relatively weaker comp store sales result in December 2010 versus November 2010 (relative weakness/decelerating trend):
ZUMZ (-11.5% decline in December 2010 versus November 2010)
AEO (-11.0% decline in December 2010 versus November 2010)
WTSLA (-9.1% decline in December 2010 versus November 2010)
GPS (-8.0% decline in December 2010 versus November 2010)
JCP (-5.5% decline in December 2010 versus November 2010

  • Looking Ahead by Looking Back… What happened in January 2010?
    In January 2010, many retailers ‘beat’ consensus comp store sales expectations. The strongest performance was in soft home, hard home, women’s apparel, handbags, and shoes. Weak categories included men’s apparel and children’s apparel.

In January 2010, retailers generally reported material merchandise margin improvements versus the prior year.

Weeks #1 and #2 were generally considered to be the strongest fiscal weeks in January 2010. Week #3 was generally held to be the weakest fiscal week in January 2010.

The Midwest, Mid-Atlantic, and Northeast were generally held to be the strongest comp store sales regions in January 2010. The West and Northwest were generally held to be the weakest comp store sales regions in January 2010.

COST suggested that weather provided a top-line headwind in January 2010. COST also suggested that a shift in the timing of the Super Bowl negatively impacted sales in January 2010 versus the prior year and that sales in Asia were negatively impacted by the shift in the timing of Chinese New Year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Thoughts on Thursday's Early Sales Release