Warm Weather Continues To Cool Holiday Sales

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Includes: BITE, FDIS, FXD, PMR, RCD, RETL, RTH, VCR, XLY, XRT
by: Lipper Insight at Thomson Reuters

By Jharonne Martis

It was a green and brown Christmas, as warm temperatures for most of December saw people running in t-shirts in many parts of the country. As a result, winter-related merchandise continued to pile up at retail stores, and inventory levels remained consistent with our initial outlook. The Thomson Reuters Same Store Sales Index is expected to show 0% growth for December 2015, both overall and excluding the drug store sector. This is much weaker than the 2.8% ex-drug gain and the overall growth of 3.3% recorded in December 2014.

Online sales were front and center this holiday season, underlying the importance of an omni-channel presence for retailers.

Analysts polled by Thomson Reuters expect the Apparel sector as a whole to report a -0.5% SSS, compared to the 2.5% gain in SSS recorded in December 2014. Excluding Gap (NYSE:GPS), one of the heaviest-weighted components in the sector, Apparel is set to improve at 2.9%, below the 4.4% result posted in December 2014. L Brands (NYSE:LB) has the strongest estimate in this group at 4.9%. On the flip side, Zumiez (NASDAQ:ZUMZ) has the weakest SSS estimate in the group at -14.0% SSS, versus an 8.0% comparison from 2014. Likewise, Gap has a -3.5% SSS estimate. Its Banana Republic Global division is expected to post the weakest SSS at -13.4% for December 2014. Similarly, its Old Navy Global division has a -0.2% SSS estimate. Meanwhile, both Stein Mart (NASDAQ:SMRT) and Cato Corp. (NYSE:CATO) are expected to post flat comps in the group.

Meanwhile, our Thomson Reuters Quarterly Same Store Sales Index, which consists of 83 retailers, is projected to post a 1.1% growth for Q4, below last year's 2.8% SSS growth, suggesting that holiday sales will be weaker than 2014.

Exhibit 1. December 2015 SSS estimates.

Exhibit 2. L Brands is on top. Zumiez shows weakness.