Retail stocks up after strong holiday weekend

by Jessica Wohl

CHICAGO - After a blockbuster performance over the long Thanksgiving weekend, risk-taking retailers such as Macy's Inc and Amazon.com Inc were rewarded with big gains in their shares, while chains that are still tinkering with their strategies reaped smaller rewards.

The majority of retailers saw their shares rise on Monday, along with the broad stock market.

Macy's, Best Buy Co Inc and others opened their stores and pushed big discounts hours earlier than many competitors, strategies that appeared to pay off with shoppers and investors. Amazon.com, meanwhile, saw success in its new Kindle Fire tablet.

J.C. Penney Co Inc and Sears Holdings Corp, two chains that kept their early morning Black Friday openings rather than holding sales late on Thanksgiving Thursday or at midnight, were among the laggards in the stock market on Monday.

Overall, the Standard & Poor's retail index was up 3.3 percent in mid-afternoon, outpacing the 2.9 percent increase in the Standard & Poor's 500.

Now, retailers must do what they can to see profitable gains for the rest of the holiday season -- a difficult task as many industry watchers expect that shoppers under financial stress will hold back after their weekend binge.

Special days, such as Memorial Day and Labor Day, drew in shoppers this year and this past weekend was no different.

"Consumers have been waiting for sale days," said Fiona Dias, chief strategy officer at ShopRunner, a consortium of online retailers that offers members free shipping and returns. "So the peaks have gotten higher and the valleys have gotten lower."

Nice weather across much of the country also helped. It was the warmest Black Friday weekend in five years, with less rain and snow than usual, according to Planalytics.

Investors will get a more detailed reading of results later this week, when chains including Costco Wholesale Corp, Macy's and Target Corp issue their monthly sales tallies.

"I presume we're going to see strong numbers for November," said Sterne, Agee & Leach analyst Kenneth Stumphauzer.

Analysts expect November sales at stores open at least a year, or same-store sales, to rise 3.3 percent among 23 U.S. chains that issue tallies, according to Thomson Reuters. That would mark a decline from a 5.5 percent rise in November 2010.

Still, Wal-Mart Stores Inc, Best Buy and other big players do not issue monthly reports, so those numbers will tell just part of the story.

( Click here for a same-store sales graphic:http://link.reuters.com/men35s)

On Monday, the spotlight shines on online sales. "Cyber Monday" is the biggest online shopping day of the year. Based on the growth seen over the weekend, especially among shoppers using their Apple Inc iPads to make purchases, it is expected to be another banner year online. Through 12 p.m. EST (1700 GMT), online sales were up 20 percent versus the same time last year, according to International Business Machines Corp.

PEAKS AND VALLEYS

Overall, Thanksgiving weekend sales soared 16.4 percent to $52.4 billion, the National Retail Federation, an industry trade group, said on Sunday.

The number of transactions at U.S. merchants jumped 17 percent on Black Friday, after 5 percent rises in the prior two years, according to data from MasterCard Inc's network.

Discounts were the name of the game, and analysts cautioned that there could be a prolonged lull in sales until closer to Christmas.

Sixteen out of 29 specialty apparel chains tracked by Goldman Sachs used aggressive storewide percentage discounts on Black Friday.

That tactic can be costly "as shoppers can use the discount for best-selling items," Goldman analysts noted, adding that 14 chains had notably deeper discounts than in 2010.

Stores with steeper discounts than last year included Abercrombie & Fitch Co's namesake chain and its Hollister chain, American Eagle Outfitters Inc and Talbots Inc, according to Goldman Sachs.

Brian Sozzi, an independent analyst who follows retail stocks, warned that discounts could come at a price for retailers.

Wal-Mart was one of the clear winners, he said, along with Best Buy and even Wal-Mart rival Target.

"It's not an all Wal-Mart kind of world," Sozzi said.

Sozzi said he is looking beyond chains to other companies that likely benefited from retailers' sales, such as underwear and T-shirt maker Hanesbrands Inc.

"If Wal-Mart had such a strong performance in basic apparel ... you look at something like a Hanesbrands."

Black Friday deals are meticulously planned for months, but extended discounts were found across a wide range of apparel chains, which may suggest that early sales were coming in below plan, said Janney Capital Markets analyst Adrienne Tennant.

Chains such as Aeropostale Inc, Gap Inc's Banana Republic, bebe stores inc, Charlotte Russe Holding Inc, Children's Place Retail Stores Inc, New York & Co Inc, Pacific Sunwear of California Inc and Chico's FAS Inc's White House Black Market pushed their early deals throughout Friday, Tennant said.

At 9:30 a.m. EST on Friday, the Aeropostale store at Pennsylvania's big King of Prussia mall gave out makeshift coupons on paper, extending a 1:00 p.m. deadline for an additional 20 percent off until 5:00 p.m. -- and then that deadline was extended for the remainder of the day, Tennant noted.