Retail Sales Strong — Now, the Bad News

S&P futures had dropped a point or so as initial jobless claims for the week came in a bit heavier than expectations, 436,000 vs. 422,000 consensus. Prior week was revised upward to 410,000, from 407,000. (Update: Dow Rises Slightly After Jobless Claims, Trichet)


1) November same-store sales were the opposite of October: analyst estimates went up as the month went on. And they were right: more surprises on the upside.

Pent-up demand for outerware combined with some evidence of an improved economy caused several companies to report results WELL ABOVE EXPECTATIONS: Limited up 10 percent (!), well above the 3.9 percent expected; JCPenney up 9.2 percent (!) vs. 3.1 percent expected, and Abercrombie up 22 percent (!) vs. 6.8 percent expected.

Other companies Gap , Macy's , Buckle , Dillards .

Bottom line: same store sales should be up close to 4 percent according to RetailMetrics, well above the 3 percent expected at the start of the month.

That's the good news. The bad news: many are at new highs.

2) Two disappointments in teen retailers: Aeropostale , which posted a 1 percent decline in sales and is trading down 8 percent pre-open, and American Eagle .

Aeropostale plunges 10 percent after a disappointing outlook for the holiday season. Although the teen retailer's earnings beat estimates by a penny in the latest quarter, the retailer warned that current quarter earnings of $0.94-$0.96 would be significantly below Street estimates of $1.03. Although sales were strong on Black Friday, it noted "sales trends decelerated significantly for the remainder of the Thanksgiving Day weekend."

Additionally, the company announced one of its co-CEOs, Mindy Meads, is departing, leaving Thomas Johnson as the sole CEO.

3) Collective Brands soars 17 percent after earnings handily topped expectations ($0.75 vs. $0.51 consensus). The owner of Payless Shoe Source saw a smaller-than-expected decline in comps and higher margins overall. Wholesale sales made also made a significant 27 percent jump in the quarter.

4) Toll Brothers rises 2 percent after reporting a fourth quarter profit, helped by lower costs and a tax benefit. Revenues fell less than expected, as the homebuilder saw higher-than-expected deliveries. However, signed contracts fell 27 percent and the cancellation rose to 8.8 percent from 6.2 percent in the prior quarter.

CEO Douglas Yearley, Jr. notes that many of our clients remain on the sidelines waiting for clearer signs that the economy is on the road to recovery.," and the company expects 2011 deliveries of 2,100-2,900.

5) Russian beverage maker Wimm-Bill-Dann soars 30 percent after PepsiCo announced it will take a 66 percent stake in the company for $3.8 billion. The majority stake will also open up the door for the U.S. soft drink maker to purchase the remaining shares later, in a deal that values the company at $5.4 billion, a 35 percent premium to yesterday's close.

How to contain inflation? Step 1: tell companies to freeze prices. That's what the Chinese government is doing. With inflation at 2-year highs, China's National Development and Reform Commission has told the countries big coal producers to boost production, which will in turn keep coal prices in check during the upcoming year.

6) Spain did successfully sell $3.3 billion of 3-year notes, but at yields significantly higher than just two months ago: 3.71 percent, versus 2.52 percent.

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