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The Retail Stock Mystery

Bob Pisani is off; this post was written by CNBC producer Robert Hum.

Stocks are hoping to extend this year’s gains in Thursday trading. Futures were up most of the morning but fell off their highs after a slightly higher-than-expected weekly jobless claims report this morning (409,000 vs. 405,000 consensus). Still, that data point is far below the 456,000 level from a year ago.

All heads now turn to the government’s key non-farm payrolls report released tomorrow (Friday) at 8:30am ET. Economists expect a gain of 150,000 jobs in December.

The key numbers today are coming from the retailers, which released their December same-store sales earlier this morning. And the results are a mixed bag.

The good news: the high-end consumer is back. Premium-priced and luxury retailers were standouts, with their comps all beating estimates. Strong comps from Abercrombie & Fitch (up 15.0%), Saks (up 11.8%), Nordstrom (up 8.4%).

Also posting solid sales results — department stores (with the exception of Macy’s): JCPenney (comps up 3.7%) and Kohl’s (comps up 3.9%) were inline with estimates while Dillard’s (up 7.0%) more than doubled the consensus sales estimate.

So despite those strong sales gains, why aren’t their stocks moving much to the upside? Remember, the run-ups the retail stocks have had over the six months (Abercrombie up 81%, Saks up 60%, Nordstrom up 35%). Al three stocks are still trading not too far from their 52-week highs.

Also of note: while sales were up for the department stores and high-end retailers, it’s still unclear how much discounting the stores had to do…and how those discounts impacted their bottom line. Out of all the stronger reports mentioned above, just 1 company raised Q4 earnings guidance — Kohl’s, which now sees earnings between $1.62 and $1.66 vs. $1.63 consensus.

Despite expectations for a strong December, it wasn’t good news for all retailers. Notable misses came from Gap (comps down 3.0%), Macy’s (comps up 3.9%), Target (comps up 0.9%), and teen retailers American Eagle (comps down 11%) and Aeropostale (comps down 5.0%).

The problems here:

1) Tougher comps…in December 2009, American Eagle comps rose 7% while Aeropostale’s comps jumped 10% — those are hard acts to follow. Meanwhile, Gap saw Old Navy comps fall 2% last month after rising 7% in December 2009. That hurt the company as Old Navy has been one of Gap’s stronger brands in recent months.

2) The inability to keep momentum going from November. While the East coast blizzard surely negatively impacted sales in the last week of December, few retailers singled out the blizzard for the December weakness. Instead they talked broadly about how December sales did not match up to the strong start to the holiday shopping season in November.

a) Target: “Sales in some key gift-giving categories moved earlier into the holiday season.”

b) Gap: "After a strong start to the holiday season in November, sales and traffic trends for our brands were less consistent in December."

c) American Eagle: “Overall December sales deteriorated from the more encouraging trends experienced in November.”

d) Macy’s: Comps rose just 3.9% vs. the stronger 4.6% rise in the November/December holiday season comps (implying a much stronger November).

Elsewhere:

1) Ruby Tuesday is up 6 percent after beating Q2 estimates ($0.07 vs. $0.05 consensus) as comps rose 4.2 percent, outpacing the industry, and margins notably improved.

Full-year guidance of $0.76-$0.86 (vs. $0.86 consensus) was reaffirmed by the company. Same-store sales are seen flat to up 2 percent.

2) Delta Air Lines reported its December traffic rose 2.4%, as international travel remained strong. However, the airline did say that snowstorms in U.S. and Europe will hit Q4 earnings by about $45 million.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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