Retail stocks slip, holiday sales boost seen fleeting
By Martinne Geller and Phil Wahba | November 27, 2012 8:42 AM EST
Investors shrugged off images of massive lines at stores over the four-day Thanksgiving weekend and focused on concerns that any strength at the traditional kickoff of the holiday shopping season will be fleeting, sending many retailers' shares down on Monday.
The National Retail Federation said sales for the four days from Thanksgiving to Sunday rose 12.8 percent from the same period last year, well above the 4.1 percent gain the trade group expects for the whole season.
Still, the S&P 500 Retail Index <.SPXRT> closed down 0.22 percent, in line with the broader market, weakened in part by concerns about the euro zone and negotiations in Washington to avoid the U.S. "fiscal cliff," which could lead to higher taxes in 2013.
Investors were concerned that strong sales initially might just mean less business later in the season.
"Nothing has changed materially with the economy or the consumer," said Walter Stackow, portfolio manager with Manning & Napier, which invests in retail stocks. "It's fair to be skeptical and think: 'We rearranged the deck chairs and pulled some sales forward.'"
Stackow called the NRF's numbers, which are projections based on consumer surveys, "out of whack" with sales trends in recent months that have been limited by persistent unemployment.
Investors will give more weight to November sales data that major chains such as Macy's Inc
Analysts are expecting an average increase of 3.3 percent in sales at stores open at least a year for November, excluding drugstores, according to Thomson Reuters I/B/E/S. Before the weekend, they expected a gain of 3.1 percent.
But even that data is only a small snapshot of only 17 chains. Many of the largest retailers, including Wal-Mart Stores Inc
Analysts and investors caution against reading too much into one weekend's numbers, especially since four of the five busiest shopping days of the season will come in the 10 days leading up to Christmas Day, according to ShopperTrak.
"It's sort of like the Super Bowl. The first couple of plays have been played, but we still do have a whole game ahead of us," said Shawn Kravetz, president of Esplanade Capital, which invests in retail stocks.
The Thanksgiving weekend typically accounts for 16 percent to 19 percent of total holiday sales, said Barclays analyst Alan Rifkin.
WALMART THE WINNER
Still, sales over Thanksgiving weekend and the holidays in general are closely watched as consumer spending accounts for about 70 percent of all economic activity. Retailers can generate a third of their sales and up to half of their annual profit in November and December.
Still, the shares of Wal-Mart and Macy's Inc
The shares of Coach Inc
One of the worst-performing retail stocks on Monday was Aeropostale Inc , whose shares closed 4.7 percent lower after it was downgraded by Janney Capital Markets analyst Adrienne Tennant, who cited increased competition from Abercrombie & Fitch Co and American Eagle Outfitters Inc .
Aeropostale was offering deeper discounts over the weekend than its two main rivals.
Oppenheimer analyst Pamela Quintiliano said Ann, which specializes in women's clothing, "may potentially prove to be the most disappointing as traffic never fully materialized on stable promotions" over the long weekend. The company's shares closed down 3.7 percent on Monday.
UBS analyst Roxanne Meyer said specialty retailers with strong foot traffic included Limited Brands Inc
Another stand-out was Deckers Outdoor Corp
The shares were also buoyed by a media report discussing the company as a possible takeover target. Esplanade's Kravetz called such speculation about Deckers, whose stock fell 68 percent in the last 12 months, "legitimate but possibly premature." He said he could envision a takeover in the medium term.
A Deckers spokeswoman was not immediately available to comment on the report.
(Reporting by Martinne Geller and Phil Wahba in New York; Editing by Lisa Von Ahn, Tim Dobbyn and Andre Grenon)
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