Sector Snap: analyst cuts some retail estimates

The Associated Press
Associated Press

An analyst lowered full-year earnings estimates on J.C. Penney, Kohl's, Macy's and Nordstrom on Wednesday due to a number of factors including warm weather, weak mall traffic and strong online competition during the holidays.

The holiday shopping season is critical for retailers as it can make up to 40 percent of their annual revenue.

Deborah Weinswig of Citi Investment Research said in a client note that temperatures are expected to be a bit higher from a year ago and conditions slightly drier, with much less snowfall in December. Warmer weather in winter months can hurt sales of cold-weather gear like sweaters, boots and coats.

Aside from slowing mall traffic and fierce online competition, the analyst also said that there seems to be no clear-cut "must-have" gifts for the holidays. To counteract this, Weinswig believes that retailers are ramping up unplanned promotions in an attempt to lure shoppers to buy.

Consumers may also be hesitant on purchases due to the possibility of tax increases soon, she added.

"We believe that consumer spending, especially at the high end, is being held back by the uncertainty around the fiscal cliff," Weinswig wrote.

The analyst cut J.C. Penney Co.'s full-year estimate to a loss of $1.31 per share from a loss of $1.25 per share. The analyst trimmed Nordstrom Inc.'s earnings-per-share forecast to $3.42 from $3.47 and lowered Kohl's Corp.'s to $4.35 from $4.41. For Macy's Inc., the analyst cut the retailer's forecast to $3.36 per share from $3.40 per share and reduced its price target to $39 from $40.

In afternoon trading:

Shares of J.C. Penney added 19 cents to $19.42.

Nordstrom gained 12 cents to $52.

Kohl's rose 40 cents to $43.90.

Macy's bucked the trend, dropping 2 cents to $38.84. Meanwhile, the broader markets were up less than 1 percent.