Luxury Products Appear to Lose Luster, Data Show

By Leslie Earnest

Dec. 2, 2005 12 AM PT

Times Staff Writer

Saving cash trumped cachet at the outset of holiday shopping, according to November sales figures released Thursday.

Retailers posted moderate gains in the first month of the important season, as consumers altered their buying patterns and unexpectedly pulled back on luxury goods, the International Council of Shopping Centers reported.

Sales at stores open a year or more rose 3.5% in November to $53.4 billion, compared with a 1.7% advance a year earlier, according to the group’s tally of 65 retail chains. It was the weakest gain of the last six months.

Same-store sales at Seattle-based Nordstrom Inc. rose 2.8% from a year earlier, falling short of analysts’ expectations of 4.6% -- marking the third time in the last five months that the high-end department store chain had missed targets. The division of Saks Inc. that includes Saks Fifth Avenue fell 2.8%.

The results were disappointing, given earlier predictions that high-end purchases would fuel sales this holiday season, as they have the last two years.

“It’s not clear exactly what’s happening,” said Michael Niemira, chief economist for the shopping center group. “But we do have some signs that the luxury market may have peaked.”

On the other hand, some California companies handily beat analysts’ expectations, notably teen retailer Wet Seal Inc. of Foothill Ranch, which said same-store sales soared 51.5% from November 2004, a strong reversal of last year’s 19.5% drop. Trendy apparel seller Guess Inc. of Los Angeles logged a 15.8% jump, well above the 9.1% that analysts were expecting.

Children’s clothing retailer Gymboree Corp. of San Francisco advanced 22%, twice what analysts had predicted. But Sharper Image Corp., also of San Francisco, extended its losing streak as sales plunged 18%.

Results may have been skewed by the particularly aggressive markdowns offered over the long Thanksgiving weekend by discounters such as Wal-Mart Stores Inc. and electronics stores such as Best Buy Co. and Circuit City Stores Inc., said Ken Perkins, president of Retail Metrics, which charts sales.

“I don’t think we’ve seen anything quite so intense as this year,” he said. The splashy sales could have pulled shoppers from department stores, including the tonier chains, he said. “My guess is, when it comes time for gift giving, they’ll return to those stores.”

Retail experts have struggled with their predictions this holiday season, given a variety of uncertainties. Higher energy prices were the main concern, but some also worried about rising interest rates and whether charitable giving to hurricane victims would crimp spending. The drop in gasoline prices in the last few weeks has helped lessen fears.

The National Retail Federation, the industry’s largest trade group, recently raised its projections for the season, saying it expected sales to rise 6% this season, up from its previous estimate of 5% and closer to last year’s strong 6.7% gain.

Shoppers kept spending in November, but many switched stores, said Niemira of the shopping center group, who said “market-share swapping” was a key theme for the month. No. 1 discounter Wal-Mart, for example, outdid No. 2 Target Corp. in same-store gains for the first time since May 2004, he noted. The Bentonville, Ark.-based behemoth logged a 4.3% increase from a year earlier; Target, based in Minneapolis, rose 2.6%.

Specialty apparel retailers, which rose 3.2% as a group, beat department stores for the first time since July. Abercrombie & Fitch Co. helped lift the specialty store category with its 23% increase. But Gap Inc., parent of more than 3,000 Gap, Old Navy and Banana Republic stores, said comparable-store sales fell 4% as all U.S. divisions lost ground; November marked the 13th straight month of flat or negative same-store sales for the San Francisco-based retailer.

Department stores collectively posted a slim 0.6% gain, dragged down by Federated Department Stores Inc., parent of the Macy’s and Bloomingdale’s chains. The Cincinnati-based retail giant said same-store sales slid 3.4%; the results do not include sales from the former May Department Stores Co., which Federated acquired in August.

The weakness was partly because some promotional events were switched to December, Chief Executive Terry J. Lundgren said in a statement.

“We know from the past few years that customers are waiting until later to shop for the type of merchandise we offer,” he said.

J.C. Penney Co. separated itself from the pack by posting a better-than-expected 3.6% increase. The Penney store at Glendale Galleria “ramped up” its gift offerings this year, manager Dave Small said.

“We’re all fighting for the customer’s attention,” he said.

November and December are particularly important to retailers. Last year, 20% of the industry’s annual sales were collected during the two months, according to the retail federation. Some retailers collect as much as 40% of their revenue in that time.

The Morgan Stanley index of 38 publicly traded retailers rose 1.47 on Thursday to 158.99.

(BEGIN TEXT OF INFOBOX)

Holiday surge

Year-over-year percentage change in November sales at stores open at least a year

Company:(% change)

Wet Seal: (+51.5)

Gymboree:(+22.0)

Guess:(+15.8)

Limited Brands:(+5.0)

Ross:(+5.0)

Wal-Mart:(+4.3)

Bebe:(+4.2)