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Why Retail Has Reason to Celebrate


Positive news from Macy's sends the sector higher.

Sales at Macy's (M) for the five weeks ended January 2 rose 0.7% and sales at stores open at least a year increased 1% in December, sending the stock higher on Thursday.

Online sales at and were up a combined 29.4% in December and are included in Macy's same-store totals.

The company boosted its fourth-quarter earnings guidance to a range of $1.14-$1.18 per share, up from $1.00-$1.05. The analyst consensus estimate is $1.13 per share.

Macy's appears to be taking the steps necessary to weather the recession and emerge from the downturn as a stronger company. Last year, the company closed 11 stores, cut about 7,000 jobs, reduced its contribution to employee retirement funds, and slashed its dividend to $0.05 a share from $0.1325. The company says the changes will save $250 million in 2009 and $400 million a year beginning in 2010. On Wednesday, the company announced plans to close five more stores.

In addition, the company reorganized its stores into 69 districts rather than four in an effort to better meet local tastes while centralizing back-office operations.

Increasing local focus may goose sales, but December's encouraging up-tick in sales may not signal a renaissance for general department stores.

The rate of new initial jobless claims continues to slow, but robust hiring hasn't resumed. This suggests that the recession, while easing, isn't over and probably means consumers who aren't sitting on their cash are likely to turn to discounters such as Target (TGT) and Walmart (WMT) in search of bargains.

Target says net retail sales for the five weeks ended January 2 increased 5%. On a same-store basis, sales rose 1.8%, or 80% higher than Macy's December increase. Analysts expected sales to decline 0.2%.

Walmart hasn't released its December sales figures.

Costco (COST), the nation's largest operator of club warehouses, said same-store sales for the five weeks ended January 3 rose 5% in the US and 25% overseas for a combined 9% increase.

Other retail discounters jumped on positive outlook. Sears Holding (SHLD), operator of Sears department stores and Kmart discount outlets, expects fourth-quarter earnings of $3.36-$4.06 per share, beating the consensus analysts' estimate of $2.71. December same-store sales rose 0.4%, including a 5.3% gain at Kmart and a 4.3% decline at Sears stores in the US.

Bed Bath & Beyond (BBBY), the largest US home-furnishing superstore, said Wednesday that 2009 profit may be as high as $2.11 per share, up from its previous estimate of $1.79. Analysts expected the company to earn $1.92 a share. On Wednesday, the company said third-quarter sales rose 10.8% from the same period a year ago.

TJX (TJX), operator of eight retail chains, including off-price retailers TJ Maxx and Marshalls, said consolidated comparable store sales for the five-week period ended January 2, 2010 increased 14% over the same period last year. The company boosted its fourth-quarter earnings forecast to at least $0.82 per share from the previous range of $0.65-$0.71.
No positions in stocks mentioned.
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