Retail downer averted by Santa

Late shopping spree helps December sales to a gain of 2.3%

January 11, 2002|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

A surge of last-minute Christmas shopping and post-holiday bargain hunting helped ward off what could have been a most disappointing holiday retail season.

Instead, retailers pulled through the crucial shopping season with an average December sales rise of 2.3 percent, which was merely the smallest year-over-year increase in five years, according to monthly sales figures released yesterday. The figures are gleaned from an index of 84 major U.S. chains by Bank of Tokyo-Mitsubishi.

Despite a recession and continued job layoffs, consumers were willing to spend. They bought toys for their children or products for their homes, anything from large-screen TVs to shower curtains to kitchen appliances.

That helped retailers such as Wal-Mart Stores Inc. and J.C. Penney Co. Inc., whose sales gains were stronger than anticipated, as well as The Limited Inc., Gap Inc. and Federated Department Stores Inc., where sales declines were less than expected in a difficult selling climate.

Warehouse clubs posted solid gains, and some specialty stores saw narrower than expected slides in sales.

"The late strength in December seemed to help the month as a whole, and consequently the season turned out to be better than feared and not the worst in decades," said Michael P. Niemira, a vice president with the Bank of Tokyo-Mitsubishi.

In a season that can account for as much as one-quarter of annual sales and one-third of profits, retailers managed to drive traffic to their stores by resorting to hefty discounts, with markdowns of as much as 75 percent.

"The consumer is certainly hanging in there and willing to spend, given the right incentives" - which in December meant low prices and the arrival of colder weather, which helped spur apparel sales, Niemira said.

Analysts viewed the retail sales results as a reassuring sign that the industry is stabilizing; average sales increases have hovered in the low 2 percent range for about three months.

Many retailers went into the holiday season with conservative plans, after struggling with slow sales earlier in the year and a drop-off in consumer spending after the Sept. 11 terrorist attacks.

Several retailers that had stronger-than-planned holiday sales boosted fiscal earnings expectations for fiscal 2001 or the fourth quarter, including Williams-Sonoma Inc.; The Limited, where December sales fell 1 percent; Wal-Mart; and Target Corp., where sales rose 0.6 percent.

Discounters and midpriced department stores benefited from consumers' preference for value-priced goods. Wal-Mart, which had expected sales to rise between 4 percent and 6 percent, saw a sales gain of 8.2 percent in its Wal-Mart stores. Store sales fell 2.4 percent for Sears, Roebuck and Co., but came in at the upper end of the company's expectations.

Sales rose 5.4 percent for Penney, which saw double-digit increases in its home-related categories, and 3.5 percent for Value City department Stores Inc., which runs Value City, DSW Shoe Warehouse and Filene's Basement.

"Those companies that offer the consumer particularly good values did well at a time when consumers re looking for bargains," said Sally H. Wallick, a retail analyst with Legg Mason Wood Walker in Baltimore. "Consumers seemed willing to spend during the holidays, but were responding to good values and discount prices."

Mall-based specialty stores and upscale department stores continued to struggle. Sales fell 7.8 percent at The Talbots Inc., 10 percent at Abercrombie & Fitch and 2.4 percent at AnnTaylor Stores Corp., where stores in downtown and tourist locations are struggling more than others in the chain, the company said.

Sales were down 7.2 percent at Saks Inc., 8.9 percent at May Department Stores Co., parent of Hecht's and Lord & Taylor, and 8.6 percent at Federated Department Stores Inc., owner of Macy's and Bloomingdale's.

Federated bettered the 11 percent to 14 percent decline it had anticipated by marking down inventory. The markdowns helped clear excess inventory, but will hurt the company's gross margin for the month, said James M. Zimmerman, Federated's chairman and chief executive officer.

"The consumer has essentially in large numbers defected from the more upscale stores and has shifted his or her spending to lower-priced stores, which now present themselves attractively with good merchandise and are easy to shop," said Kurt Barnard, president of Barnard's Retail Trend Report, a New Jersey-based industry newsletter and consulting firm.

Gap Inc. saw sales fall by 11 percent - but that was an improvement over November, when sales plummeted 25 percent.

The apparel chain lured consumers by lowering prices on sweaters and outerwear an additional 25 percent after Christmas.

Toys "R" Us Inc. said sales rose 5 percent, after having fallen by 3 percent in November.

John Eyler, president and chief executive officer, called the performance "solid, in spite of a very challenging retail environment."

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