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Heavy discounting cuts into holiday profits

New York -- Retailers across the board, from Victoria’s Secret parent L Brands Inc. and American Eagle Outfitters to Family Dollar Stores and Bed, Bath & Beyond, cut their fourth-quarter earnings forecasts on Thursday as heavy promotions and discounts cut into profits. Results were also impacted by multiple snowstorms, a shortened shopping season and cautious consumers.  

In an Associated Press report, Ken Perkins, president of RetailMetrics LLC, said fourth-quarter earnings growth for the 120 stores he tracks are expected to be up 1.2%, the weakest performance since the 6.7% drop in the second quarter of 2009 as the country was just coming out of the recession

The heavy discounts did cause shoppers to open their wallets, resulting in a stronger-than-expected 2.7% increase in December same-store sales at the eight retailers tracked by the Thomson Reuters Same-Store Sales Index. (Very few retailers still report same-store sales on a monthly basis.)

L Brands said its December same-store sales rose 2%, missing Wall Street expectations for a 3.7% gain. The chain cut its holiday-quarter profit forecast.

Cato Corp also slashed its profit forecast after reporting a 4% decrease in same-store December sales.

“December same-store sales results were negatively impacted by bad weather in a number of our markets early in the month. Excluding the impact of this weather event, the sales environment remained difficult but same-store sales were in line with our year-to-date trend," said John Cato, chairman, president, and CEO of Cato.

American Eagle Outfitters Inc. said that same-store sales fell 9% in the nine weeks that ended on Jan. 4, 2014, compared to the year-ago period.

Pier 1 Imports Inc. downgraded its earnings forecast for the fiscal fourth quarter and the full year, citing a disappointing December.

© 2014