Retailers' present to Wall Street? A lump of coal
A few weeks after consumers finished unwrapping presents, a wave of retailers are gifting Wall Street with lumps of coal.
On Monday, Lululemon Athletica and Express became the latest retailers to warn investors of disappointing earnings in the holiday quarter. These negative forecasts follow similar warnings last week from a range of retail companies, including American Eagle Outfitters and Zumiez. In response, Lululemon stock shed 16 percent and Express shares dropped about 2.5 percent.
In a release Monday, Lululemon's CFO said the company had seen "traffic and sales trends decelerate meaningfully" since the beginning of January. Because of that, Lululemon cut its net revenue forecast and revised its fourth-quarter guidance from flat same-store sales to a decline in the low-to-mid-single digits.
Meanwhile, the CEO of Express said the specialty retailer had "a drop in traffic that was even deeper than anticipated as consumers waited until much closer to Christmas to shop." To draw them, Express extended and deepened discounts—a promotional environment it expects to maintain amid what it sees as "weak" January traffic.
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Shares of The Bon-Ton Stores were also sharply lower Monday. The department store chain said Friday that adverse weather hit same-store sales during the holiday quarter.
Worst season since 2008
The 2013 holiday season was six days shorter than that of 2012, and the compressed period affected sales as retailers tried to adjust with earlier Black Friday and Thanksgiving sales, said Richard Jaffe, an analyst at Stifel Nicolaus.
Unlike past years, however, in-store Black Friday weekend sales fell compared with the previous year, according to ShopperTrak.
Though online sales continued to be the bright spot, growth there was lower than it was last year. Online transaction rose 10 percent from Nov. 1 to Dec. 31—a sharp uptick but still less than the 14 percent surge in 2012, according to comScore.
"I think the weakness in bricks and mortar was weaker than expected, and we can say the weather the week after Christmas and the calendar had a negative impact," Jaffe said.
To counteract the shortened season, he said, many retailers became more promotional than they had originally planned to be. In turn, discounts eroded gross margins.
"Once it starts, it becomes contagious," Jaffe said. "If every teen retailer in the mall runs 50 percent and you don't, you're not going to have much traffic."
In a note Friday, Morgan Stanley analysts wrote that the 2013 holiday period is "turning out worse than any since 2008."
"Weak traffic and higher-than-expected promotional activity drove misses across the board," they wrote, adding that a dramatic slowdown in the first half of December "proved too deep to recover from."
Although several retail stocks have already been hit after delivering weak guidance, Morgan Stanley said it believes "bad news isn't fully priced in."
Easier comparisons ahead
Jaffe doesn't expect many more surprises, as "the cat's out of the bag" for many retailers' ho-hum quarters.
"The difference between 2013 and 2014 is going to be driven by product," he said. "Is there a trend that's compelling and can be delivered to the consumer?" he said, noting that the popularity of colored pants boosted sales for many stores in 2012, which made for a difficult comparison last year.
"I certainly hope it gets better," Jaffe said. "Being simplistic, if 2013 [was] worse, it means 2014 compares get progressively easier."
—By CNBC's Katie Little. Follow her on Twitter