Retail Shows “Marginal Upside” For Holiday Season

Retail beat projections over the holiday season, showing a 2.9% increase over last year’s dismal showing:

While many retailers beat expectations by a wide margin, some still seem to be coming to grips with the economic downturn. J.C. Penney Corp. (JCP) posted a same-store sales drop of 3.8% that was essentially in line with analysts’ projections. While other retailers saw improvement in home goods, like towels, and small appliances, J.C. Penney said its home category experienced the weakest sales during December. Barnes & Noble Inc. (BKS) lowered its third quarter forecast on Thursday, citing weak holiday sales.

Among more generalized apparel sellers, those with a focus on value performed best. TJX Cos. (TJX), which buys items below wholesale price and sells them at steep discounts at its T.J. Maxx and Marshalls stores, posted a 14% same-store sales jump, more than double analysts’ expectations. It raised earnings guidance. Gap Inc.’s (GPS) and Limited Brands Inc.’s (LTD) sales didn’t quite achieve analysts targets, but results were good enough for Limited to boost its quarterly earnings guidance.

Department stores beat views across the board, with Saks Inc. (SKS) and Nordstrom Inc. (JWN) particularly standing out in spite of their reputation for higher-priced goods, posting 9.9% and 7.4% sales increases, respectively. Saks has been taking steps this year to not only cut inventory, but introduce less-costly merchandise.

Promotions during this holiday season were more surgical and inventory planning more rational than the panicked discount pricing that set in last year.

An industry analyst offered a pragmatic assessment:

“You could say we’re bouncing along the bottom with some marginal upside,” said Doug Conn, managing director at Hexagon Securities. “Companies are still in transition and dealing with this new economy and consumer.”

That’s certainly better than last year but I still doubt it’s the stuff of which recoveries are made.