Retailers bask in holiday results

Many report positive results, but are less upbeat about 1Q

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As they finish tallying their holiday take, many retailers are reporting that the key shopping season was good for their bottom lines. But they are entering the new year with some caution.

Wal-Mart, Target, Nordstrom, Home Depot, Macy’s and Kohl’s were among the major retailers that this week reported fourth-quarter earnings that beat analysts’ expectations. Even long-suffering Sears posted a narrower loss than anticipated Thursday.

Retailers beat earnings expectations on average by 5.6 percent, the best performance since the first quarter of 2010, according to a report from Retail Metrics, a retail data research firm.

About two-thirds of the 59 retailers that had reported fourth-quarter earnings as of Thursday afternoon have beat Wall Street’s expectations, while 30 percent missed; that’s better than the 15-year average of 61 percent beating estimates, according to the firm, which tracks 123 retailers in its index.

Blended earnings growth, which combines actual results from companies that have reported with estimated results for companies that have yet to report, is expected to reach 12.1 percent, with revenues up 4.2 percent, the report said.

Much of the boost was due to an improved labor market, heightened consumer confidence and lower gas prices, but some companies had other reasons. Home Depot, for example, which posted a particularly strong quarter, benefited from people spending more to fix up their homes, as well as bad weather that sent people shopping for shovels and snow blowers, Retail Metrics said.

In addition, the company increasingly has been courting professional buyers, who have been behind strong growth in the home improvement category, according to retail research agency Conlumino.

But the outlooks for the first quarter are less optimistic.

Fifteen of the 16 retailers that reported earnings this week gave first-quarter guidance below Wall Street’s consensus estimates. Home improvement chain Lowe’s was the only company that skewed higher. (Kohl’s, whose guidance of $4.40 to $4.60 was in line with estimates of $4.54, was included in the falling-short category because the midpoint of its guidance, $4.50, is below consensus).

Many are contending with the negative effect of foreign exchange rates as the dollar rises, as well as continued uncertainty about how the recently ended slowdown at West Coast ports will affect sales and expenses as they evaluate alternative transportation to get backlogged merchandise to their stores.

Gas prices, while still low, have inched up 29 cents from their lows last month.

Additionally, several retailers are increasing expenditures on e-commerce or personnel — including Wal-Mart and T.J. Maxx, which announced wage hikes — which can cut into near-term earnings, the report said.