Several U.S. retailers reported higher-than-expected sales for November, confirming a strong start to a holiday shopping season that could determine whether the U.S. economic recovery has legs.
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Not only were there more shoppers on Black Friday -- the annual discount bonanza following U.S. Thanksgiving -- but retailers also benefited as more people bought for themselves, promotions were less aggressive than last year and weather cooled after a mild October.
Same-store sales, or sales at stores open at least a year, are a closely watched gauge of retail performance and offer an early look at the strength of the shopping season, which can account for as much as a third of a retailer's annual revenue.
Consumer spending also equals about 70% of the U.S. economy, so this year's holiday sales season is being closely watched to determine if the economic recovery can pick up steam.
After only a handful of sales reports, Costco Wholesale Corp (NASDAQ:COST), Zumiez Inc (ZUMZ) and Hot Topic Inc (HOTT) reported better-than-expected November sales. Eight of the 11 retailers that reported sales so far beat Wall Street expectations, according to Thomson Reuters data.
One early disappointment was teen apparel chain Aeropostale Inc (ARO), which on Wednesday forecast a holiday-quarter profit below Wall Street expectations after posting a 1% decline in November same-store sales.
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Black Friday kicked off the holiday season last weekend, bringing hordes of people to retailers like Wal-Mart Stores Inc (WMT.N), Best Buy Co (BBY.N) and Macy's Inc (M) before dawn with early-bird discounts. Wal-Mart and Best Buy do not report monthly sales.
Broadly, consumers are in a buying mood due to pent-up demand following two anemic holidays seasons coupled with growing consumer incomes and lower savings rates, said Craig Johnson, president of Customer Growth Partners.
"It's like a perfect storm for a good holiday," Johnson said late on Wednesday. "The 83% of people with full-time jobs are beginning to spend again. That's the big factor that's different."
Johnson is expecting holiday sales to rise 4.5%, but said that if the current pace continues, he may raise his forecast closer to 6 percent. By contrast, the National Retail Federation forecast a gain of 2.3%, following a 1.1% increase in 2009 and a 3.4% decline in 2008.
Costco reported a 9% rise in November same-store sales. Analysts on average forecast a 6.2% increase, according to Thomson Reuters data.
Zumiez posted a 20.7% rise in November same-store sales, beating estimates of a 12.6% increase -- the highest expectation for any apparel retailer. The company also forecast quarterly earnings above Wall Street estimates.
But some retailers might expect a lump of coal.
Analysts were expecting a rise of 3.7% on average for November, according to Thomson Reuters data, with the biggest gain seen for discounters like Costco and Target Corp (TGT).
Hot Topic logged a 2.1% decline, but that was smaller than the 4.6% drop that analysts expected.
The Standard & Poor's Retail index .RLX is up 26 percent since August on hopes of improving earnings. Analysts have said there may be little more room for a near-term increase in many retail stocks unless the holiday season is even stronger than expected.