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January 8, 2016

Most Retailers Beat December Estimates But Still Post Weak Results

by Jharonne Martis.

Holiday retail sales were not particularly holly jolly, as retailers beat estimates, but posted sluggish results. The Thomson Reuters Same Store Sales Index actual result for December 2015 showed a gain of 0.6%. Excluding drug stores, the index registered a 0.8% comp. in both cases, the estimate was for 0% growth. However, a 3% gain is considered a sign of a healthy retail economy.

Only Gap missed its SSS estimate, even though it faced an easy comparison from a year ago. Retailers are blaming the warmer-than-usual weather and a strong dollar (weaker tourist spending) for the slowdown in consumer spending.

On the flip side, L Brands was the clear winner for December. The retailer said it delivered its best December ever. L Brands beat expectations of 4.9% with an 8.0% SSS result. Its Victoria Secret division was its strongest performing group at 8.0%, followed by Bath & Body Works at 6.0%. Victoria Secret is also poised for robust growth in January as they offer their semi-annual sale, which always resonates well with customers.

Zumiez registered the weakest result in our retail universe at -8.9%, followed by The Buckle’s -5.4% SSS result which came in below its -8.8% final estimate. Costco has the biggest weighting in our index, and posted a 1.0% SSS, and is being hurt by gasoline sales. Excluding gas, Costco posted a robust 5.0% SSS.

Looking forward to Q4, our Thomson Reuters Quarterly Same Store Sales Index, which consists of 83 retailers, is expected to post 1.1% growth for Q4 (vs. 2.8% in Q4 2014).

Exhibit 1.  Performance — Overall and Compared to Expectations


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