A Ho-Hum Holiday For Retailers?

It was early October when the National Retail Federation made the anouncement: Holiday sales in 2013 could rise 3.9%, despite there being six fewer shopping days before Christmas.

Today, market pundits see a far more ho-hum holiday for retailers.

Nick Colas, market strategist at ConvergEx Group, a global brokerage company based in New York, expects sales to expand 1% to 2% over last year. In a recent note, he writes:

"They had the season pegged for a 3.9% positive comp to last year. While the NRF has been overly conservative in prior years, our indicators actually point to a weaker holiday in 2013…Even a negative reading wouldn't be a surprise.

The Thanksgiving holiday weekend didn't do much to alleviate those worries.

Why? The NRF estimated some 141 million American hit stores and online retailers during weekend, up from 139 million in 2012. But people spent less, with the average shopper shelling out $407.02, against $423.55 last year.

Part of that drop may stem from cautious investors waiting for bigger discounts closer to Christmas, according to Thomson Reuters analyst Jharonne Martis.

Unfortunately, bigger discounts mean smaller profit margins. Just look at Express (EXPR).

During Wednesday market action, the teen clothing retailer plunged almost 23% to $19.08 after it lowered full-year profit projections as Thanksgiving week sales exceeded last year’s levels but didn’t meet expectations. Or as Chairman and Chief Executive Michael Weiss, said:

We had been planning for a promotional holiday season, but we now expect the intensity of those promotions to reach heightened levels and we are updating our full year guidance accordingly.

Express now sees per-share earnings at $1.46 to $1.51 on same-store sales growth in the low-single digits, compared to its previous estimate for a per-share profit of $1.52 to $1.60 and same-store sales growth in the low- to mid-single digits.

The company sees fourth-quarter per share profit of 66 cents to 71 cents, below recent the 78 cents a share expected by analysts recently surveyed by Thomson Reuters.