9 Retail Winners and 10 Losers From the Holiday Season

The holiday season is make-or-break time for most of the retailing world. A large portion of annual sales -- and an even bigger chunk of earnings -- are generated in just those critical weeks encompassing November and December. Let's look at a few companies that executed well during that must-win period at the end of 2017, and a few that stumbled badly.

Costco (NYSE: COST) might not be the first place you think of when it comes to holiday shopping, but the warehouse retailing giant helped fill millions of stockings this past year. In fact, sales growth for the holiday period was a market-thumping 10% in December. That success implies more market share gains against rival Sam's Club and was likely a key reason why owner Wal-Mart (NYSE: WMT) decided to shut down 63 of its warehouse locations.

Given its impressive sales momentum heading into the key shopping period, Walmart (NYSE: WMT) likely enjoyed strong holiday season results. The country's biggest retailer said in mid-November that it expected sales to grow by a healthy 2%, and the latest operating trends back up that aggressive outlook.

Walmart enjoyed customer traffic gains through the first nine months of the year, and that success was bolstered by a booming e-commerce business. These trends suggest that, while consumers love to shop online, they're not abandoning physical stores at all. 

ALSO READ: This Is How Wal-Mart Sees the Future

Youth-focused retailer Five Below (Nasdaq: FIVE) had a banner holiday outing, with sales at existing locations jumping 6.7%. That result marked the company's strongest holiday performance since it went public in 2012. Store expansion was a much bigger factor though, as its growing footprint allowed overall revenue to spike 27% through the holidays.

Those gains support management's prediction that Five Below can eventually grow to as many as 2,000 locations across the country, which leaves lots of room to expand from the current base of just 600.

You only have to look at the stock's 60% spike in 2017 to know just how optimistic investors are feeling about Best Buy's (Nasdaq: BBY) retailing business. That confidence is well supported, though. The consumer electronics specialist raised its holiday quarter outlook in mid-November, after all, and is on track for its best sales growth in nearly a decade.

Under CEO Hubert Joly, the retailer has now enjoyed four straight years of sales growth. Profitability has improved sharply, too, rising to 4.7% of sales in 2017 compared to 2.8% three years earlier. Not bad for a company that many thought was doomed by the "showrooming" threat back in 2012.

Target (NYSE: TGT) had warned investors to expect nearly flat holiday-season results, but things worked out much better for the retailer. Revenue rose by over 3% thanks to many of the same factors that helped rival Wal-Mart. Specifically, Target is enjoying modest customer traffic growth combined with booming e-commerce sales. That digital sales channel is making full use of its network of physical locations, too, as 70% of Target's online orders over the holidays were either picked up or delivered from one of its local stores.

Target expects just slightly higher sales in 2018 and, like Wal-Mart, plans to continue increasing investments in things like higher wages and a more robust digital sales channel. These challenges imply weak earnings growth, at least over the short term.

Who says people won't shop for furniture online? Home furnishing specialist Wayfair (Nasdaq: W) enjoyed a 63% surge in holiday orders this year as customers purchased new sofas at a rate of one every 13 seconds on Cyber Monday. Wayfair's sales included bulkier items, too, such as hot tubs, pool tables -- and even a 3,875-pound storage shed. Success in these typically store-based product categories is giving the management team confidence that they can grow this business for many years to come. They should get help from Wayfair's proprietary delivery network that's making shipping on things like rugs, swing sets, and large appliances faster and cheaper.

ALSO READ: Wayfair Is Having a Growth Spurt -- and It Shows

E-commerce leader Amazon.com (Nasdaq: AMZN) is forecasting growth of between 28% and 38% over the holiday quarter, which would be phenomenal considering the business is already at over $150 billion in annual sales. A growing portion of those holiday gains are coming from its own branded products, too. The Echo Dot and Fire TV stick were the best-selling items over the holiday season, and it's no coincidence that these devices are both deeply tied to Amazon's growing ecosystem that includes digital content like TV shows and music, in addition to traditional product orders.

The retailer is hoping that by getting its smart speakers and streaming devices into millions of homes, it can reinforce loyalty among Prime subscribers and extend its market-thumping growth momentum.

Macy's (NYSE: M) management announced in early January that its customers were "ready to spend this season," and that the struggling department store chain effectively capitalized on that eagerness on the part of holiday shoppers. Sales inched higher by 1.1% to put the retailer on pace for its first positive result by that metric in nearly three years.

Macy's still has major challenges to face, including a store base that's still too large, and too expensive. Thus, investors are looking for real estate sales to play a major role in lifting their returns over the coming years.

Trends were looking good heading into Lululemon (Nasdaq: LULU) holiday quarter, and they only got better from there. The yoga-inspired apparel retailer beat its aggressive fourth-quarter guidance on both the top and bottom lines thanks to enthusiastic demand for its products. "We are thrilled with our performance this holiday season," CEO Laurent Potdevin said in early January as the company lifted its full-year forecast.

The success means Lululemon should continue enjoying rising sales and expanding profit margins in the year ahead, as long as it keeps meeting its customers' demands for fashionable, high-quality exercise clothes.

ALSO READ: Lululemon Athletica Pushes Forward With Ambitious Goals for 2020

Sears Holdings (Nasdaq: SHLD) is in trouble. The company endured a 16% sales decline in the November-December period, which marked a worsening of the brutal 12% drop the company had been averaging through the first three quarters of the year. The performance put the struggling retailer one step closer to a potential bankruptcy. And, sure enough, the stock plunged in early 2018 as Sears announced plans to take on even more debt.

Pier 1 (NYSE: PIR) was optimistic that it had the right merchandising strategy heading into the holiday season, but actual results were much worse than management had hoped. Customer traffic trends "dropped considerably" during the first two weeks of December, the company recently told investors, and the slump forced the retailer into an aggressive price cutting strategy aimed at keeping inventory moving through the system. As a result, earnings should come in at just $0.14 per share for the full 2017 fiscal year, compared to the $0.36 per share result executives had forecast. 

Coffee titan Starbucks (NYSE: SBUX) underperformed management's fourth quarter expectations on both the top and bottom lines, and executives placed the blame squarely on their seasonal drink and product launches. "Holiday limited time offerings and merchandise did not resonate with our customers as planned," CEO Kevin Johnson told investors in late January. This failure was the main reason why sales grew by just 2% last quarter while Starbucks had projected gains of between 3% and 5%. 

That miss raises the possibility that Starbucks will have to lower its growth expectations yet again as it struggles with weak operating trends in its U.S. market. The good news is that those challenges are being offset by strong growth in international markets, especially China. 

Consumers can often shift their preferences dramatically from one year to the next, and GoPro (Nasdaq: GPRO) is now painfully aware of that fact. The sports camera giant warned investors to expect a sharp decline in fourth quarter sales and profits after its product lineup generated no excitement over the holidays. Instead, the company was forced to slash prices to avoid a large inventory write-off. 

That write-off might still happen, which is why the company is now working hard to lower costs through layoffs and by exiting the promising, but expensive, drone market.

Bed Bath & Beyond (Nasdaq: BBBY) announced solid sales growth just before the start of the holiday shopping season, but management's outlook was anything but positive. The specialty retailer warned that, in the weeks leading up to Black Friday, rivals began slashing prices and it responded by cutting its prices, too. This promotional stance "has continued to be necessary as we approach Christmas," Chief Financial Officer Sue Lattmann said. As a result, Bed Bath & Beyond now sees profits stopping at $3 per share for the year, down a brutal 34% from the prior year.

ALSO READ: 3 Retail Trends Investors Should Watch in 2018

Under Armour (NYSE: UAA) (NYSE: UA) is expecting a tough holiday season to cap what was an awful year for the business. Management started 2017 off by predicting a quick growth rebound. Instead, CEO Kevin Plank and his team had to lower their sales and profit forecast on two separate occasions. Its third quarter report, announced just before the start of the holiday season included its first revenue decline as a public company. That slump led management to forecast a 66% drop in operating income for the full year, rather than the 24% decline they had initially projected back in January.

GameStop (Nasdaq: GME) met its broad sales targets for the holiday season, but that success was outweighed by bad news in the retailer's latest update. Low margin hardware sales rose as its pre-owned game segment shrank, and those trends point to slumping profitability. Worse yet, its recently acquired tech brands unit, which management purchased to help diversify away from a declining gaming market, took a large write down after missing sales expectations. The shaky operating trends have many investors worried that GameStop's hefty dividend payment might not survive to the next holiday season. 

For a struggling enterprise like Bon-Ton (Nasdaq: BONT), the holiday season can make or break its business. And its recent weak holiday outing might just spell the end of the line for this retailer. The company, which owns 260 stores under the Bon-Ton, Bergners, Boston Store, and Carson's brands, noticed a sharply negative turn in its operating trends during the period. Sales went from a 3% increase in late November to a 3% decline for the broader period. That shift likely meant bigger losses for the furnishings and apparel specialist, and so its creditors are getting closer to demanding liquidation.

ALSO READ: Bon-Ton Stores Reveals a Long-Shot Plan to Survive

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Demitrios Kalogeropoulos owns shares of Costco Wholesale, GameStop, Starbucks, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool owns shares of and recommends Amazon, GoPro, Starbucks, Under Armour (A Shares), Under Armour (C Shares), and Wayfair. The Motley Fool owns shares of GameStop and has the following options: short April 2018 $18 calls on GameStop. The Motley Fool recommends Costco Wholesale, Dave & Buster's Entertainment, Five Below, and Lululemon Athletica. The Motley Fool has a disclosure policy.