Same-store sales seen up 4.3 percent in December

When top retailers post their December sales this week, Wall Street analysts are expecting them to report a healthy end to the holiday season, helped by discounts, improved consumer sentiment and tactics like extended hours and layaways.
Some 22 major chains, from Macy's Inc and Target Corp to Costco Wholesale Corp and Gap Inc should post an aggregate 4.3 percent increase in December sales at stores open at least a year, according to Thomson Reuters, capping a season that started moderately but gained steam in December.
The top gainers are again expected to be discount chains like Costco, with its cheaper gasoline, and Target as shoppers sought out low prices.

Higher up the price spectrum, chains like Saks Inc, Nordstrom Inc and Macy's Inc should also do well, helped by the continued recovery of high end spending and a stock market that rebounded after swooning earlier in the fall.
But chains like J.C. Penney Co Inc and Gap, which are under pressure to slash prices to lure price conscious shoppers, are expected to be laggards again after seeing sales declines in November.
Penney sales should be flat, while Gap's are expected to slip 0.5 percent, hurt by a 3 percent drop at its low-price Old Navy chain, according to Thomson Reuters data.
"Those that have been doing well will continue to do well," said Richard Hastings, consumer strategist at Global Hunter Securities. "But there were broad-based improvements, so December should lift a few more boats."
If December sales meet expectations, they would beat December 2010's 3.1 percent jump.
Early signs showed December was shaping up to be a good month, helped by last minute shopping and strength after Christmas Day. The ICSC/Goldman Sachs weekly chain store sales index rose 4.5 percent during the week ending December 24.
The National Retail Federation in mid-December raised its forecast to a 3.8 percent increase for November and December, from 2.8 percent, based in part on a strong start to December.
November same-store sales rose 2.9 percent, according to the Thomson Reuters index, missing analyst forecasts despite a record turnout on Black Friday, the day after Thanksgiving that puts the season into high gear.
For a graphic on same-store sales: http://link.reuters.com/byw75s
MARGINS UNDER PRESSURE
The same-store sales number does not include results from major chains like Wal-Mart Stores Inc, Best Buy Co Inc and Sears Holdings Corp and therefore only gives a partial snapshot of the retail season.
Wal-Mart's discount chain alone counts for 11 percent of total U.S. retail sales. When the company, which stopped reporting monthly results in 2009, was included in the Thomson Reuters index, it accounted for 50 percent of the tally.
Last quarter, Wal-Mart finally broke a nine-quarter streak of U.S. same-store sales declines.
Janney Capital Markets expects that improvement to continue in the holiday quarter with a rise of 1.9 percent, helped by its layaway program, which allows shoppers to pay in installments.
Retail sales rose 5.2 percent during the 2010 holiday season despite weakness at Wal-Mart. So strong sales at Wal-Mart will be more crucial to declaring this season a winner for U.S. retailers.
But in spite of better consumer spending, it was a competitive season that saw chains try to undercut each other through low prices, compromising margins.
The pressure to give deals even after Christmas was on full display last week at Champlain Centre mall in Plattsburgh, New York. Limited Brands' Victoria Secret was offering a 'Buy 1 get 1 50 percent off' deal on select bras, while Old Navy was selling jeans for adults for $15 and kids jeans for $10.
"Those increases came at the expense of reduced margins," said Al Ferrara, director of BDO USA's national retail practice.
One potential dark cloud for chains that are reliant on clothing sales, like Macy's, Penney and Kohl's Corp is the warm December in the northeast that likely dented sales of cold weather gear.