Early Holiday Sales Weak
U.S. retailers logged wimpy sales in November, which might prompt them to tempt consumers by taking a bigger-than-planned ax to prices this month.
Sales at stores open for at least one year, a key industry indicator, rose just 1.7%, compared with 3.7% in November 2003, according to a survey whose results were released Thursday. And of the 71 retail chains surveyed, 45% reported sales declines.
“The breadth of the weakness was certainly evident,” said Michael Niemira, chief economist for the International Council of Shopping Centers, which compiled the results.
Instead of shopping steadily through the month in a way that builds momentum, he said, people bought in surges spurred by sales, and that made for little “follow-through” spending. What’s more, he said, bricks-and-mortar stores may have lost revenues as more Americans shopped on the Internet.
As a result, Niemira trimmed his forecast for the holiday season, saying he expected same-store sales to rise 2.5% to 3% in November and December combined, not the 3% to 4% he had predicted earlier.
A string of California retailers disappointed Wall Street, including San Francisco-based Gap Inc. It registered a 4% decline overall, with its Old Navy and Banana Republic chains down 5% and 3%, respectively, and Gap stores outside the U.S. sinking 9%.
Gap shares closed at $21.63, down 85 cents, on the New York Stock Exchange. And the Morgan Stanley retail index of 28 leading retailers slipped 59 cents to $140.63.
Another San Francisco retailer, Sharper Image Inc., said its same-store sales slipped 3%. It didn’t blame consumer timidity, however, but congestion at West Coast ports, saying shipments of merchandise had been delayed. Sharper Image shares rose 56 cents to $19.80 on Nasdaq.
Nationwide, a recent trend continued in November: Stores that sell luxury goods generally fared well, up 5.2% as a group, while discounters collectively rose 1%. Behemoth Wal-Mart Stores Inc. in Bentonville, Ark. -- which offered fewer promotions than its competitors at the start of this shopping season -- saw its same-store sales rise a limp 0.7%.
The upshot could be good for people who haven’t bought all their holiday gifts yet.
“This is going to mean the promotions are going to start as early as this week,” said Marshal Cohen, chief industry analyst for NPD Group, a market research firm in Port Washington, N.Y.
For many people, including those weighed down with debt and who have tapped the limits on their credit cards, the price tag makes all the difference these days.
Consumers “would have been happy with 25% to 30% discounts in the past,” said Kurt Barnard, president of Barnard’s Retail Trend Report, which tracks industry trends. “Today they want 40% to 50% discounts. And they’re willing to wait.”
Not all the chains that put items on sale found that was the magic bullet. Although Los Angeles-based Guess Inc. said it had “increased its promotional activity, negatively impacting November margins,” its same-store sales were up just 0.5%, well below the 4.9% analysts had expected.
Guess stock lost 9.6% of its value Thursday, falling $1.44 to $13.56 on the New York Stock Exchange.
There were a number of notable exceptions to the downbeat results. Brisbane, Calif.-based Bebe Stores Inc.-- one of retail’s hottest performers of late -- said sales jumped 23.2%, almost 5% higher than analysts had anticipated. Its stock, which has more than doubled over the last year, hit a 52-week high Thursday before closing at $38.99, up 4 cents, on Nasdaq.
Pacific Sunwear of California Inc.’s sales rose 2.7%, less than expected but enough to keep its positive streak alive. The Anaheim retailer, which sells many of the surf and skateboard apparel brands made by Southern California companies, saw its shares fall 98 cents to $21.37 on Nasdaq.
Companies that operate department stores also offered mixed results. Sears, Roebuck & Co. said November got off to a sluggish start but perked up once promotions were rolled out on the day after Thanksgiving. The Hoffman Estates, Ill.-based retailer posted a 2.8% comparable-store increase.
St. Louis-based May Department Stores Co. said same-store sales fell 7.9%, while high-end clothier Neiman Marcus Group Inc., based in Dallas, posted an 8.4% increase.
Despite November’s generally disappointing numbers, analysts and economists said retailers could rebound this month. (Some experts said November probably wasn’t really as bad as it looked: They said more people were purchasing gift cards this year, and cards aren’t counted as sales until they’re cashed in.)
The economy is generally improving and gasoline prices are on their way down, said Scott Hoyt, an economist at Economy.com.
And there’s still plenty of shopping left to do. Only about 6% of the holiday shopping was completed by the end of November, economist Niemira said.
“December -- that’s when you start to see the procrastinators coming out,” he said. “I think you’ll also see a late surge in demand.”
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November sales
Percentage change from a year earlier in November sales at stores open at least one year
*--* Company % change Bebe +23.2% J.C. Penney +12.0% Target +3.2% Nordstrom +3.1% Sears +2.8% Pacific Sunwear +2.7% Wal-Mart +0.7% Guess +0.5% Federated -1.4% Ross -2.0% Gap -4.0% Limited Brands -5.0% May -7.7% Hot Topic -8.0% Gottschalks -8.1% Wet Seal -19.5%
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Sources: Times wire services, company reports
