Stores, Web have merry Christmas

Holiday sales season rated 2nd-strongest of the decade, a `binge'

Warehouse clubs do well

Internet business is expected to be double last year's


January 07, 2000|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Retail sales soared above expectations in December for many of the nation's biggest chains as shoppers on holiday buying sprees flocked to the stores.

Plenty of consumers stayed home -- to shop online. But even an explosion of Internet buying didn't hurt brick and mortar retailers, most of whom also sell online.

Merchants selling high-end goods, such as consumer electronics and jewelry, fared especially well, but mid-priced department stores continued to struggle.

During the month, sales at stores open at least a year rose 6.6 percent, the Bank of Tokyo-Mitsubishi's retail index showed. The holiday season, including spending in November, ranked as the second-strongest of the decade, the bank said.

Though final figures are not yet in, online U.S. consumer spending is expected to have doubled this holiday season, reaching $6 billion, according to Internet researchers Jupiter Communications Inc. Online spending reached an estimated $14.9 billion in 1999, Jupiter said.

In December, retailers benefited from record consumer confidence fueled by low unemployment and low inflation, as well as pre-Y2K fever, analysts said.

"December retail sales showed consumers being on an almost unprecedented buying binge for holidays," said Kurt Barnard, president of Barnard's Retail Trend Report.

Sales increases came about without the help of last-minute price-slashing by merchants, analysts said.

"There were lots of markdowns and promotions, but a lot of them were planned, and as a result not likely to have an effect on the gross margin and net profits," Barnard said.

Even after Christmas, consumers continued spending at a brisk pace.

"Sales benefited from very, very robust sales in the fifth week of the month [thanks to] Y2K-related buying on the part of freaked-out consumers, and a tremendous redemption of gift certificates," said Bob Buchanan, senior retailing analyst with A. G. Edwards in St. Louis.

Gift certificates, which have been growing in popularity, are not counted in the sales figures until redeemed.

Analysts had predicted continued brisk spending at the end of a particularly strong year for the industry.

"But it was still pretty incredible to see the American consumer continue its strength like this," said Alan Mak, a retail analyst with Argus Research in New York.

After Wal-Mart Stores Inc. and Federated Department Stores Co. reported gains of 9.1 percent and 6.4 percent respectively, compared with December a year ago, analysts raised fourth-quarter earnings estimates. (The fiscal year for most retailers ends in January.)

Mass discount stores, such as Wal-Mart, benefited from pre-New Year's spending on items such as flashlights and batteries.

Sales rose 5.5 percent at Kmart Corp. and 7.8 percent at Kohl's Corp.

Warehouse clubs saw even bigger gains -- 14.7 percent at BJ's Wholesale Club Inc. and 15.8 percent at Sam's Club, a division of Wal-Mart.

Most specialty apparel stores also fared well, continuing a trend of pulling market share from de- partment stores, which suffered as a category.

Those department stores that depend primarily on apparel sales were further hurt by unseasonably warm weather earlier in the month.

With slower sales, department stores were forced to mark down merchandise more than other categories of retailers, Buchanan said.

Sears, Roebuck and Co. saw sales dip 0.6 percent, while sales at J. C. Penney Co. Inc. department stores inched up 0.5 percent. Even Dayton Hudson, the parent of mass discounter Target, saw only an increase of 3.6 percent because of weakness in its department store divisions.

Sales at department stores rose 2.82 percent, according to the Bloomberg Same-store Sales index for department stores. Discount stores gained 6.49 percent, while specialty/apparel stores had an average increase of 5.53 percent, according to the Bloomberg index.

But strength or weakness tended to be company-specific rather than category-specific for specialty stores. Sales rose 11.8 percent at Talbots Inc. and 5 percent at Gap Inc, but only by 0.9 percent at AnnTaylor Stores Corp.

"Retail is all about day-to-day execution," Buchanan said. "Anybody can figure out strategy. The key is executing day to day."

Monthly retail sales

Company Monthly Monthly YTD YTD

sales* same-store sales*same-store........................ ....................................................................pct. change

AnnTaylor Stores $135.6 +0.9 $1,018.3 +8.8

Dayton Hudson $5,743.0 +3.6 $30,878.0 +5.0

Federated $3,421.0 +6.4 $17,223.0 +4.6

The Gap $2,075.0 +5.0 $10,916.0 +7.0

J. C. Penney $2,620.0 +0.5 $14,335.0 -1.5

Kmart $5,880.0 +5.5 $33,799.0 +4.9

Kohl's Corp. $856.8 +7.8 $4,322.3 +7.9

The Limited $1,846.0 +5.0 $9,121.0 +9.0

May Dept. Stores $2,753.8 +2.2 $13,202.0 +2.6

Men's Wearhouse $182.5 +5.8 $1,080.0 +7.5

Sears $4,523.4 -0.6 $28,093.2 +1.8

Wal-Mart $20,814.0 +7.9 $131,274.0 +8.1

* In millions

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