Target (NYSE:TGT), Costco (Nasdaq:COST), Macy's (NYSE:M), Gap (NYSE:GPS) Plunge on Weak December Sales

Christmas sales in December came in way under expectations, hammering the retail sector, with stocks like Target (NYSE:TGT), Costco (Nasdaq:COST), Macy's (NYSE:M) and Gap (NYSE:GPS) plummeting on the news.

While sales in November were strong, all of that was discount-generated, and it'll come down to margins and earnings as to whether that will ultimately be viewed as a positive, with the probability of low earnings being the result.

For the period of October 31 through January 1, same-store sales grew by 3.8 percent for the retail sector from last year during the same quarter, the best performance since 2006. But again, the bottom line is earnings not sales, and that's what we have yet to hear.

Another problem heading into 2011 is the training of customers to expect bargains at a time when clothing prices will be going up because of increasing prices of cotton.

Those attempting to spin this as a great season are delusional. Even the high-end retailers had to discount in order to attract customers. Their sales were better as a result, but at the cost of earnings.

Costco closed Thursday at $70.65, down $0.34, or 0.48 percent. Macy's closed at $23.97, down $1.00, or 4.00 percent. Gap ended the session at $20.70, down $1.53, or 6.88 percent. Target closed the day at $54.93, down $4.01, or 6.80 percent.