Holiday Sales Dismal Despite Big Discounts

A last-minute surge in Christmas buying was not enough to significantly boost holiday sales for many of the nation’s retailers, who reported a disappointing season Thursday as deep discounts did little to attract recession-wary shoppers.

The sluggish results give further indication that consumers are not ready to lead the ailing economy to a recovery. This was the third dismal holiday shopping season in a row and could lead to further financial difficulties for a number of retailers. Although shoppers were out in force, they shunned costly items and stuck to practical goods.

The picture for some chains was particularly painful in California, where the recession was late in coming and shows no signs of leaving soon. Mervyn’s, for example, reported that sales in the state fell at a greater rate than in the rest of the country.

In Orange County, stores were busier than many retailers had expected. Unfortunately, some of those customers were looking to make returns instead of buying additional merchandise.

Robin Storti of Santa Ana, for example, said she was too sick during most of December to take advantage of the pre-Christmas sales. “I spent too much,” said Storti, 29, a sales representative. “I might do some exchanging.”

Pat Murphy Kessinger, a retail analyst with the Irvine office of Ernst & Young, said retailers were marking down merchandise that had not already been discounted before Christmas. Some stores advertised sales up to 60% off.

“The profits are so small now, they’re probably just trying to move merchandise to get it out of the store,” Kessinger said.

Members of the National Retail Federation, the leading trade group for large chains, reported 0% to 3% growth at best for November and December over results in 1990. Such a showing is actually very poor, because 1990 itself was a bad year and the numbers are not adjusted for inflation, said Jack Schultz, federation president. Actual December sales figures will not be reported until late next week.

“It was awful,” said Edward Weller, an analyst with Montgomery Securities, a San Francisco investment firm. “Retailers’ expectations fell day by day as the season unfolded, and those expectations were met.”

And the “terrible job market” portends a sub-par recovery for the nation’s retailers, said economist Sandra Shaber, with the Futures Group consulting firm in Washington. “The problems in retailing long preceded this recession and will, I fear, continue once we’re in recovery.”

Weller’s and Shaber’s disappointment with the season was echoed by retailers busy with post-holiday sales and promotions.

“I don’t think anybody is jumping up and down about this holiday season,” said Robert Buzard, a consultant at D. Laurenti, a pricey men’s store where a red-and-black “SALE” sign hung across the width of the Glendale Galleria shop. “If we can make last year’s figures, I think we would consider ourselves fortunate.”

Shoppers leaned toward the practical and low-priced this season, retailers said.

At the Sport Chalet sporting-goods outlet in Oxnard, items that sold well among price-conscious shoppers included Ping-Pong tables, lawn games and exercise equipment, “traditional family things that more than one person could use,” said store manager Martin Rumpf.

Certain pricey sporting goods went begging. “We didn’t see strong numbers in the ski hardware department,” said Rumpf, who credited a last-minute surge of Christmas shoppers to enable the store to at least match last year’s holiday results.

The season also proved disappointing in other parts of the nation.

“Terrible--off 40%,” said Nitzo Levy, manager of Ritz Cameras & Electronics Inc. on Manhattan’s East Side. “I think a lot of people are owing a lot of money. They can’t use their credit cards anymore. Nobody was ready to spend big.”

Sale items were definitely a draw for Chicago shoppers Michael Worosz and his family, who drove 30 miles from their home in Indiana to shop. “Prices are pretty steep,” said Worosz. “Unless (items) are on sale, we don’t buy. They do go on sale eventually.”

Early on, the holiday season took on a promotional aura, with stores touting discount upon discount and racks filled with sales merchandise even before Thanksgiving. Even with a raft of holiday promotions, though, much of the merchandise on retailers’ shelves across the country stayed put, as bargain-hungry shoppers expressed their disdain for mundane goods by keeping their wallets folded.

“We were disappointed with Christmas,” said Stephen E. Watson, president of Minneapolis-based Dayton Hudson Corp., which owns Mervyn’s and Target stores. “We really expected we’d do 5 to 7 percentage points better than we did.”

Mervyn’s, a department store carrying moderately priced clothing and housewares, saw sales tumble in the 15 states where it operates, with its 109 California outlets reporting steep declines “in the double digits,” Watson said. California, where the economy has been plagued by massive layoffs at defense and aerospace companies, accounts for 60% of Mervyn’s sales.

The company’s Target discount chain turned in the best performance, with sales gains “well into single digits.” But Watson said the company is forecasting very little improvement in the near term. “We’re expecting the first half (of 1992) to be pretty difficult.”

With shoppers focusing on functional, moderately priced gifts, the climate was right for stores such as Target, Wal-Mart, the huge discounter based in Bentonville, Ark., and the Gap, a San Bruno-based merchant of practical, down-to-Earth casual wear.

K mart Corp., based in Troy, Mich., said its 2,254 U.S. stores experienced a cheering sales surge at the tail end of the season, with jewelry, small appliances and basic toys proving most popular.

“We had a sensational last two days prior to Christmas,” said spokesman Orren Knauer. The boost was enough to help overall sales shoot up a respectable 8% to 9%, Knauer added, although stores open at least a year probably will report gains in the “mid-single digits.”

The 11th-hour surges at K mart and other retailers helped keep sales from being “disastrous, “ said Thomas H. Tashjian, an investment analyst with First Manhattan Co. in New York.

At Sears, Roebuck & Co.’s 868 stores nationwide, the season finished as it had begun, with a strong burst over the days just before Christmas. But sales in between were weak, spokesman Perry Chlan said.

“We expected holiday shopping to be late and value-oriented, and it was,” Chlan said, adding that sales on Monday surpassed those of the day after Thanksgiving, the traditional kickoff for the holiday season.

Home health equipment such as treadmills and step machines moved quickly. Big-screen televisions also sold briskly, Chlan said, but heavy promotions will cut into profits.

R.H. Macy & Co., which owns Macy’s, Bullock’s and I. Magnin, declined to be specific, but spokesman Jim Fingeroth in New York said business “was about even with last year’s season.” The company recently reported a steep loss and, like many other retailers, has been troubled by a high debt load.

Some retailers and manufacturers also remained conservative, keeping expectations and inventories low.

Jodi Duesterhaus, manager of the Imaginarium toy store at MainPlace in Santa Ana, said many customers couldn’t find several popular items the week before Christmas because “certain manufacturers were playing it cautious. Then, when the demand hit, we couldn’t get merchandise fast enough.”

Bert Levi, a partner in Ed Levi & Sons Jewelers in San Diego, does not see much improvement in his business--where holiday sales fell 30% from last year--or the economy in 1992.

“People are getting laid off every day,” said Levi. “Another Christmas will come and go and then it will pick up.”

Concern about job security and the economy forced many shoppers nationwide to curb their holiday spending. After his employer consolidated operations, telephone company worker Jerry Campeau of Colorado said he and his wife decided to cut back on gifts for each other until the post-holiday sales arrived.

“I’ve had my (work) group consolidated several times in the past,” said Campeau while shopping at Villa Italia Mall in Lakewood, Colo. “I think the consolidations are going to come in other parts of the company this time, but you never know for certain.”

“People don’t have money. They’re either fired or they got no bonus,” said David Saatchi, manager of Farid’s, a New York jewelry store where sales are running at about half of last year’s level.

“And it’s going to get worse and worse,” said Saatchi. “If things don’t turn around soon, we’ll probably have to close the store.”

Gloom is begetting more gloom, said Scott Yatchyshyn, 25, a clerk in the Nordstrom women’s shoe department at MainPlace. He echoed the thoughts of several Orange County retailers interviewed Thursday when he said that people perceive that the economy is worse than it is because of media reports. His own situation, he said, is much better than what he reads and hears in the news. Still, he too has been cautious this year: “I just bought gifts this year, nothing for myself.”

Contributing to this story were Chris Kraul in San Diego, James Peltz in Los Angeles, Victor F. Zonana in New York, free-lance writer Anne Michaud in Orange County, and researchers Tracy Shryer in Chicago and Ann Rovin in Denver.