Holiday Sales Off to a Weak Start for Big Retailers : Christmas: The figures for November are worse than expected. Specialty and discount stores may be cutting into major chains’ share.
The Christmas shopping season started even more miserably last month than many recession-wary merchants forecast.
Major U.S. retailers on Thursday released November reports showing that a key barometer of performance--sales at stores open more than one year--generally were down or up only modestly from their weak levels of a year earlier. The figures would look even worse if they were adjusted for inflation, which is running at 6.7% this year.
“The only clear trend is that consumer spending is getting very weak, very fast,” said Barry Bryant, an analyst with Prudential-Bache Securities in New York.
An index of 47 retailers compiled by Prudential-Bache declined for the fifth consecutive month. It showed that sales at stores open more than one year--generally known as same-store or comparable-store sales--rose only 0.2% last month. In October, the gain was 1.9%.
Consumers, particularly in Southern California, should expect a continued blitz of price markdowns at department stores, analysts said. The slide in housing values in Southern California “has really slowed consumer demand,” said Thomas H. Tashjian, an analyst with Seidler Amdec Securities in Los Angeles.
Retailers, he said, “are going to be promotional, because they planned on better business.”
Analysts cited eroding consumer confidence, weakening regional economies, higher gasoline prices and warm weather across much of the country in November, which undermined sales of sweaters, coats and other winter apparel.
They also pointed to the individual problems of companies such as Sears, Roebuck & Co., J. C. Penney & Co. and Los Angeles-based Carter Hawley Hale Stores, parent of the Broadway-Southern California.
Sears, by some standards the nation’s biggest retailer, reported that its same-store sales were off 2.4%. J. C. Penney’s comparable-stores decline was 4.6%; Carter Hawley’s was off 7.4%.
Circuit City Stores, a Richmond, Va.-based firm that is the nation’s biggest consumer electronics retailer, said its comparable-stores’ sales fell 6%. It cited increased competition in the Los Angeles area, where the Silo and Good Guys consumer electronics chains recently opened stores.
Another weak performer was May Department Stores, parent of May Co. California, whose same-store volume was off 5%.
Analysts noted, however, that many shoppers may be postponing their buying to the last days of the holiday season and that a peaceful solution to the Persian Gulf crisis or other good news could spur business. Also, they said, most retailers entered the holiday season with tight inventories to contain the possible damage to their bottom lines.
In another move to cut expenses, stores this year have dismissed thousands of workers. Sears this week froze the salaries of 20,000 managers.
Analysts said the weak sales will put added pressure on debt-burdened retailers such as Carter Hawley, R. H. Macy & Co. and Child World Inc., the nation’s No. 2 toy store chain. In addition, analysts expressed concern that even if a late surge in shopping rescues the Christmas season, retailers still appear likely to suffer a slowdown early next year.
A number of discounters and perennially strong specialty stores--including Gap Inc. apparel chain, whose sales were up 6%--bucked the overall dismal trend. The gains by big discounters such as Target Stores and Wal-Mart--and the Dominguez-based close-out chain, Pic ‘N’ Save, which was up 11.1%--were attributed partly to consumers who are steering away from department stores and heading instead to less expensive retailers.
“Customers are interested in value, and that’s defined as price. Cheap price,” said Alan L. Gilman, managing partner in charge of retail industry services for the accounting firm Arthur Andersen & Co.
Edward Weller, an analyst with Montgomery Securities in San Francisco, said discounters also fared well compared to other retailers because of their wide variety of merchandise. “Even when you don’t buy apparel, you still get motor oil and toothpaste,” Weller said.
Even among discounters, however, there were signs of weakness. Wal-Mart’s same-store sales gain was relatively strong at 7%, but was down from its previous double-digit gains. Kmart’s figure was off 1.5%.
Although the monthly sales figures released by major stores provide strong clues about the health of the retailing industry, the U.S. Commerce Department’s monthly retail sales report is considered a better economic indicator. The government report is broader, taking into account the sales of autos and gasoline.
It is also designed to reflect the results of the many big retailers that do not disclose monthly figures, such as R. H. Macy & Co. and Montgomery Ward & Co.
