Thursday, January 7, 2010

December same store sales released. Abercrombie weak, Ross excellent (ANF, ROST, ZUMZ,HOTT)

Last night and this morning, apparel retailers reported December same store sales (sales from stores open at least 12months, to separate organic growth from sales gains from new store additions).

Abercrombie & Fitch (ANF) continues its string of dismal sales results, in part due to its own confusion over markdown strategies and protecting "the brand."  Their SSS were -19% from a year earlier, versus expectations for -12%.  Shares are off 7.5%. Things might be slightly less bad there however, when you add back gift card sales.  Though cash was received, the sales are not booked until the cards are redeemed.  This was a negative hit to top line sales of $22million or 4.5%, but with 34 analysts following the stock, one would think gift cards were baked into expectations to a degree.

At the other end of the economic spectrum, Ross Stores (ROST) reported +12% SSS, versus an expected +7%.  Concurrently, they raised 4th (current) quarter earnings guidance to 1.15 per share versus the Wall Street consensus estimate of 98cents.  The increased guidance was due to the December SSS performance as well as increased SSS for January.  From their release:

"Michael Balmuth, Vice Chairman and Chief Executive Officer, commented, "We are very pleased with our robust sales performance during the important holiday period. December benefited from strong traffic trends as customers continued to respond favorably to the wide array of terrific bargains throughout our stores.  Our ability to deliver much better than expected sales while operating our business on considerably lower inventories also contributed to solid, above-plan merchandise margin quarter-to-date.  Shoes, Home and Dresses remained the strongest merchandise categories in December, while the Northwest and Southeast were the top performing regions."

Atop the leaderboard today is Zumiez Inc (ZUMZ), who eeked out a +.3% SSS figure in the face of expected -6.2% performance.  The December performance allowed them to increase Q4 earnings expectations to 26cents from their previous guidance of 20cents.  The stock is up 18%, far more than it probably should be given the numbers, and more due to the large number of people short the stock who're now racing to close their position buy buying shares back.

Hot Topic(HOTT) is another loser today.  They reported SSS of -11% versus the expected -8.3%.  On the recorded call, management note that Twilight-related merchandise was down 20% year over year, making this year's New Moon franchise very tough to compete with last year. And in the spirit of vampires, here's South Park's goth kids talking about conformists:



On average, the apparel stores are just slightly positive today.  Impressive numbers are required to justify continues gains for the shares, which on average are up 110% in 12months.  For some of the companies, even 2011 earnings estimates are significantly below previous peak earnings in 2007, allowing room for improvement.


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