- POSTED: 10 Jan 2014 08:59
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Victoria's Secret parent L Brands and home decor chain Pier 1 Imports joined other retailers in slashing profit forecasts on Thursday following disappointing holiday sales.
NEW YORK: Victoria's Secret parent L Brands and home decor chain Pier 1 Imports joined other retailers in slashing profit forecasts on Thursday following disappointing holiday sales.
The two cited heavy discounting, higher marketing costs and poor weather over the late-November to December gift-buying season in the United States, following similar poor reports from Bed, Bath & Beyond and Family Dollar.
Shares of both companies moved sharply lower. While there have been a few winners, analysts said the generally poor early post-holiday commentary so far suggests the 2013 holiday shopping season was even weaker than expected.
"We were cautious heading into the holiday season," said R J Hottovy, senior retail analyst at Morningstar.
But the surprisingly bad results from Bed, Bath & Beyond and others suggests "the pressures were a lot more widespread than we initially thought," Hottovy said.
A bright spot was the rise of online retail, Hottovy added.
L Brands, which also owns the Bath & Body Works chain, said comparable store sales increased just 2 per cent during a five-week holiday period ending January 4. It cited "incremental promotional activity" that depressed profit margins.
Pier 1 said comparable stores sales for December sank 5.7 per cent, due mainly to bad weather that depressed store traffic.
"Our holiday assortments were excellent and our execution both in-store and online was first class - making it all the more upsetting to have our results impacted by forces beyond our control," said chief executive Alex Smith.
Shares of Pier 1 sank 12.4 per cent, while L Brands fell 4.1 per cent.
Bed Bath & Beyond, a home furnishing and appliance store, plummeted 12.5 per cent after announcing that earnings for the fiscal third quarter, which ended November 30, missed expectations and the fourth-quarter profit outlook had declined.
Another disappointment came from Family Dollar Stores, which declined 2.1 per cent after earnings underperformed in its fiscal first quarter, ended November 30. The company also sharply cut its full-year forecast.
"Many of the top-line challenges we faced in the first quarter, including a challenged consumer and an intensified promotional environment, have continued to impact our business," said chief executive Howard Levine.
Hottovy said the results suggest many consumers are still struggling with higher payroll taxes, a tough employment market and concerns about higher health care costs.
"It's still kind of a sluggish recovery if you look where the average US consumer is," Hottovy said.
There have been a few bright spots in recent days, suggesting a few winners in the holiday shopping bonanza.
Costco Wholesale jumped 3.9 per cent after announcing that comparable store sales rose 3 per cent for the five-week period ending January 5.
Gap rose 1.9 in post-market trade Thursday after it reported a 1 per cent rise in comparable store sales for the holiday shopping period.
Macy's soared 7.6 per cent higher after confirming its 2013 earnings forecast and giving a bullish outlook for 2014 following a "successful" holiday shopping season.
But not all of the Macy's news was good: the company also announced plans to cut 2,500 jobs in a reorganisation.