Holiday sales may have missed target A 1.3% increase from last week below expectations

Retailing

December 25, 1996|By BLOOMBERG BUSINESS NEWS

WASHINGTON -- The nation's retailers may have come up short in meeting their modest sales targets in the final stretch of the Christmas shopping rush.

Retail sales last week rose 1.3 percent from a week earlier, below expectations, according to a sales report yesterday from the Bank of Tokyo-Mitsubishi/Schroder Wertheim. "The momentum out there has slowed," said John Harris, an analyst at Schroder Wertheim in New York.

A big question is whether sales perked up in the final three days before Christmas, which represent 20 percent of December's business, Harris said.

Post-holiday spending -- and the amount of discounting store owners are forced to make to clear shelves -- will be important, too, in determining profit levels for retailers, said William Ford, senior economic adviser at TeleCheck Services, the Houston-based check acceptance company.

In some places, demand picked up Sunday, leaving businesses hopeful about a late surge in sales. "We're seeing a Christmas rush," said Katie McKay, manager of an F.A.O. Schwarz toy store Garden City, N.Y. Sales over the weekend and into this week exceeded expectations, she said.

Over the weekend, "sales were very solid," added Jan Drummond, a spokeswoman for Sears, Roebuck & Co. The best selling items were home goods, Craftsman tools and apparel, Drummond said.

Even so, the last-minute burst of activity may at best help many retailers reach the 4 percent to 5 percent increase over last year's holiday sales that shopkeepers wanted. While that would top last year's dismal 2 percent gain, it would still be one of the weakest performances in recent years, analysts said.

Sales at department stores were stronger than at discount stores, in part because lower-income shoppers are spending less than expected, said Schroder Wertheim analyst Harris.

For investors, the specter of disappointing sales reinforced the notion that the U.S. economy is continuing to grow slowly with little inflation.

One bright spot for retailers was robust sales of toys, led by the unexpected hit Tickle Me Elmo doll as well as strong sales of the Nintendo 64 video game system, and "Star Wars," "Space Jam" and "101 Dalmatians" action figures.

Video games sales rose for the first time since peaking in 1993, said Frank Reysen, editor of Playthings magazine.

Sony Computer Entertainment America said last week that its PlayStation video game system has exceeded $1 billion in sales 15 months after it was introduced. More than 2 million of the video systems had been sold in North America by Dec. 1.

In addition, Nintendo of America Inc. estimates that by Christmas it will have shipped 1.5 million Nintendo 64 systems, though sales of the new product did not begin until Sept. 29. In some areas demand exceeded supplies.

Away from shopping malls and department stores, sales over the Internet this holiday shopping season are expected to increase four-fold to $194 million from $46 million a year ago as consumers gain confidence in cyber-shopping. Internet sales are expected to "soar" in the next three to five years, a survey by Arthur D. Little/Giga Information Group showed.

Catalog retailers' sales also have risen this holiday, so much that many have been unable to meet demand, particularly clothing catalogs such as Lands' End Inc. or L. L. Bean, said Bill Dean, who heads W. A. Dean and Assoc., catalog management consultants.

In a survey of 20 catalog retailers, Dean said 15 companies

reported sales rising an average of 13 percent. "Overall, the companies are doing really well and are struggling to get back into stock and meet demand," he said.

While that might limit sales gains, it should be good news for some companies' profits because they will end the fourth quarter with lean inventories and would not have to mark goods down to sell them.

Maxwell Sroge & Co., another catalog consultant, said it expects catalog sales to rise about 12 percent in all of 1996 to $96.65 billion. That includes all catalogs except book and record clubs.

Retailers that sell higher-end goods, such as Neiman Marcus, and mid-priced department store chains, such as Sears, Roebuck & Co., have had the best sales increases overall, analysts said. Consumer electronics chains have had the toughest time, eking out slim sales gains amid fierce competition and a lack of new products.

Not all retailers' sales were as strong as hoped for, though. Dayton Hudson Corp., for example, said while sales rose in each of its divisions -- Target discount stores, department stores and Mervyn's -- the gains were lower than expected.

In the Mitsubishi report, sales at stores open at least a year, or same-store sales, rose 4.8 percent for the week ended Saturday, from the comparable week a year ago, the report said. In the second week of December, sales rose 4.2 percent, and in the first week, sales rose 2.6 percent.

Same-store sales are considered the best measure of a retailer's results because they do not include the effects of store openings, closings and expansions in the past year.

Pub Date: 12/25/96

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