Unhappy holiday sales doom stores
Taking stock of a rough holiday season, retailers are shuttering stores and trimming expansion plans as they stare down edgy consumers.
Industry analysts said Thursday that there was little mystery behind the plans announced by several chains this month. “We’re in poor economic times, and when you’re in poor economic times, retailers close stores” and reduce the number they plan to open, said Eric Beder of Brean Murray, Carret & Co. “That will accelerate into the second half of 2008.”
Zale Corp. said Tuesday that by the end of February it would have closed 60 Zales, Gordon’s Jewelers and Piercing Pagoda locations, including a Zales in Fashion Valley Mall in San Diego and a Piercing Pagoda kiosk at the Promenade in Temecula, Calif. Zale also said it would close several dozen more stores later this year.
Liz Claiborne Inc., which has been reviewing its holdings as it charts a long-term growth plan, is pulling the plug on its 54-store Sigrid Olsen chain, which has been losing money for several years. Ethan Allen announced that it would be shutting 12 of its furniture stores and two service centers, and Talbots Inc. is putting up the shutters on 78 Talbots Kids and Talbots Men’s stores.
Also this month, Anaheim-based Pacific Sunwear of California Inc. made it official that it would shutter the last 154 stores in its struggling demo chain. And Macy’s Inc. capped the holiday season with a New Year’s Eve announcement that it would close nine stores because of disappointing sales.
Executives with a number of retailers attending an industry conference in Dana Point were upbeat, including Guess Inc. and American Apparel Inc., both Los Angeles companies, and Ugg boot maker Deckers Outdoor Corp. in Goleta, Calif. But Beder said he thought the mood had shifted.
“Two years ago, this was a party,” he said. “This year, it’s not a funeral, but it’s somewhat somber.”
One attendee took the strong showing at the 10th annual ICR XChange investor conference, which drew representatives from about 120 companies, as a bad omen.
“I was hoping nobody would be here,” said Henry P. Renard, executive vice president of investment advisory firm Inverness Counsel Inc. in New York. “Then you’d know we were at the bottom of the retail market.”
Although such conferences generally attract large investors looking for retailers with strong growth potential, this one drew more people looking for “beaten-down value stocks,” Beder said.
Sales at stores open a year or more rose just 2.2% in November and December combined, making it the weakest holiday season in five years, according to the International Council of Shopping Centers. And this month, the group is predicting a year-over-year gain of only 1.5% to 2%.
With no sign that the gloom is lifting, retailers are trying to find the best way to proceed.
Quiksilver Inc., which has lost money for the last three quarters and expects a loss of 9 cents to 12 cents a share in the first quarter of 2008, said Thursday that it was exploring alternatives, including the possibility of selling its French ski division Rossignol. It sold its Cleveland Golf unit last month.
“What we’re implying now is all the alternatives are possible, including the whole Rossignol group,” spokeswoman Sophie Nicolet said. That prospect cheers analysts who have watched Rossignol drag down Quiksilver’s financial results since the surf wear maker acquired the ski maker in 2005.
“Good riddance to Rossi,” analyst Todd Slater at Lazard Capital Markets said in a note to his clients Thursday, adding that he expected Quiksilver to announce the division’s sale this year. Quiksilver’s stock rose 34 cents to $7.38.
Retailers hoping to plump profits by shutting stores could help drive down retail lease rates in malls, analysts said, making it easier for expanding businesses to slip into the vacated spaces.
“Many retailers are going to close stores,” independent analyst Jennifer Black said. “This is a really big deal. Those that are growing can really benefit.”
Guess, which has seen its profit grow for 17 consecutive quarters, hopes to be one of them.
“There’s been a lot of appetite for the same types of space,” Guess President Carlos Alberini said Thursday. “We are hoping this is going to contribute to improving rates.”
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