Target's Christmas week was better than the discount chain expected

But firm says Dec. sales will be slow, as is true for retailers generally

January 01, 2003|By BLOOMBERG NEWS

NEW YORK - Sales increases at Target Corp. and Wal-Mart Stores Inc. during Christmas week are not expected to prevent U.S. retailers' holiday sales gains from being the smallest in more than 30 years.

Target's same-store sales last week were better than expected, the company said in a recorded message. Nevertheless, its sales this month are less than the retailer's prediction of a 3 percent to 5 percent increase.

Meanwhile, sales at the nation's retail stores open at least a year rose 2.9 percent from the year-earlier week, a Bank of Tokyo-Mitsubishi Ltd. and UBS Warburg report showed yesterday.

Bank of Tokyo, which tracks results at more than 80 retailers, still expects November-December sales to rise 1.5 percent from a year earlier. But that's the smallest gain since 1970.

Wal-Mart, the world's largest retailer, has said December's sales will rise less than the company's original forecast. Shoppers using gift certificates or looking for post-holiday bargains probably gave merchants less of an end-of-month boost than they hoped for, Bank of Tokyo said.

"I was shocked by how bad the numbers were right up through Christmas," said Martin Bukoll, an analyst at Northern Trust Corp., whose $320 billion in assets include shares of Target and Wal-Mart. "It was like somebody turned the electricity off."

Merchants may not have been able to sell enough merchandise to buffer profit margins from the effects of price cuts. Weaker-than-expected sales may lead companies to lower profit estimates, analysts said.

Goldman, Sachs & Co., UBS Warburg and Prudential Securities trimmed forecasts in the past week for retailers, including Wal-Mart and Federated Department Stores Inc.

"Sales will come in at the low end of expectations, but profit gains will come in even lower," said David Duchow of Thompson Plumb & Associates, whose $1.7 billion in assets include Target and Gap Inc. shares. "There's been a lot of discounting."

Wal-Mart said its December sales will rise 2 percent to 3 percent, less than its forecast for a gain of as much as a 5 percent.

Federated's November-December sales will decline about 4.5 percent, more than expected. J.C. Penney's department-store sales rose 4.5 percent in December.

The National Retail Federation last week lowered its total sales-growth forecast for merchants in the holiday period to 3.5 percent from 4 percent.

Merchants have been counting on after-Christmas purchases to boost monthly results, analysts said. Last year, sales from Dec. 26 to Dec. 31 accounted for 11 percent of holiday-season results, according to the International Council of Shopping Centers.

Same-store sales in the Dec. 28 period increased 2.1 percent over those of the previous week, the Bank of Tokyo and UBS report said. Same-store sales exclude results from new and closed stores.

Total sales for the week that ended Saturday fell 9.4 percent from those of the previous week, according to ShopperTrak RCT, a Chicago-based firm that tracks data from more than 30,000 retail stores.

Total retail sales will rise 1 percent in December, the smallest year-over-year monthly gain since September 2001, when terrorist attacks hurt consumer spending, ShopperTrak said.

Retailers cut prices by as much as 75 percent early in the season to attract consumers concerned about jobs, credit-card debt and the economy. That led some shoppers to expect even steeper discounts in the days after Christmas, analysts said.

"Consumers are disappointed they're not seeing the discounts they want to see," said Britt Beemer, chairman of market research firm America's Research Group. "Some people may be waiting for the January clearance sales, hoping they'll be better."

Most U.S. retailers will report December sales Jan. 9.

Wal-Mart's shares fell 13 cents to close at $50.51 yesterday on the New York Stock Exchange. Target was unchanged at $30; shares of Federated, which owns Macy's and Bloomingdale's, rose 68 cents to $28.86; and J.C. Penney Co. added 12 cents to $23.01.

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