American Eagle Outfitters and Bed Bath & Beyond are among seven retail chains so far that have cut their expectations for their fiscal fourth quarter, which includes the critical holiday shopping season when stores can make up to 40 percent of their annual sales.
The holiday season was challenging for stores as many Americans still were contending with the effects of a shaky economic recovery. Weather was also an issue, as snowstorms across the country kept some shoppers home. And the season was six days shorter, which meant less time for people to shop.
Retailers discounted early and often to get shoppers into stores. In fact, it was common to see sales of 50 percent off a store's entire stock of clothes during the final days of the season. It appears the discounts got people to spend - sales for November and December rose a better-than-expected 2.7 percent to $265.9 billion, according to data tracker ShopperTrak. But the deep price cuts ate away at retailers' profits.
As a result, Bed Bath & Beyond Inc., a Union, N.J. company that owns Cost Plus World Market and Bed Bath & Beyond lowered its earnings forecast for the fiscal fourth quarter and full year that ends early this year after its third-quarter results missed analysts' expectations.
Pier 1 Imports Inc., a Fort Worth, Texas-based chain that sells home decor also downgraded its earnings forecast for the fiscal fourth quarter and the full year, citing a disappointing December.
And teen retailer American Eagle Outfitters Inc. reported sales at stores open at least a year fell 7 percent in the nine weeks that ended on Jan. 4 when compared with the same period a year ago.
After a "solid" Thanksgiving weekend, sales through Christmas slowed down as other retailers offered more promotions, American Eagle CEO Robert Han said. As a result, the chain reduced its fourth-quarter expectations to the low end of its previous outlook.
All told, Ken Perkins, president of RetailMetrics LLC., a research firm, said that fourth-quarter earnings growth for the 120 stores he tracks are expected to be up 1.2 percent, the weakest performance since the 6.7 percent drop seen in the second quarter of 2009 when the economy was just coming out of the recession
"This was a holiday season that most stores would like to forget," he said.