Mall traffic was strong over Christmas weekend, but lots of stores were offering the kinds of discounts that don’t bode well for margins, writes FBR Capital Markets analyst Anna Andreeva in a note. In fact, Andreeva noticed numerous things that raised concerns.
“While traffic levels seemed strong, more than ever consumer shops were on sale, and inventory levels in the channel continue to look elevated. Despite easier comparisons, we think December to date has decelerated versus a very strong November for retailers (we think Black Friday was the peak, and mall traffic levels have been running in the negative 1% to negative 3% range since then). In addition, warm weather across most markets has been a negative for sales of seasonal categories such as outerwear and sweaters (especially in the Northeast, although weather finally broke over the weekend with potentially some pent-up demand).”
Andreeva was nonetheless impressed by what she saw at a couple of retailers. American Eagle Outfitters (AEO) appeared to have run through its relatively high second-half 2011 inventory during the holiday season and could post big comps. And Abercrombie & Fitch (ANF) should be able to match or beat Street expectations for 4.1% same-store-sales growth in the fourth quarter.
Aeropostale (ARO), however, was less impressive: Andreeva saw the company offered a 70%-off post-Christmas sale and thinks its traditional price advantages could be narrowing. Also, Children’s Place (PLCE) could see margins shrink.
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