WRAPPING UP CHRISTMAS ’91 : Another Dismal Retail Season : It Was Third Disappointing Year in Row, but Discounters Once Again Bucked Trend
The nation’s major stores reported generally weak Christmas sales for the third straight year Friday, the figures confirming that consumers curbed their holiday spending in the face of the recession.
But a few retailers reported moderate gains, including discount chains Wal-Mart Stores Inc., Kmart Corp. and apparel marketer Gap Inc., because they are employing strategies that will continue serving them well as consumers remain frugal through the mid-1990s, analysts said.
Those stores understand that Americans’ spending patterns began changing dramatically well before Christmas because of fears about the weak economy and job security. Conspicuous consumption went out, saving money came in. The successful stores responded by offering fashionable, quality products that consumers need --and at low prices.
It’s a formula that apparently is not being pursued correctly by such huge retailers as Sears, Roebuck & Co. and J. C. Penney Co.--based on their sluggish sales recently. Those stores could be long-term losers if they don’t get in sync with consumers’ tastes, analysts said.
“There’s a new reality in consumer spending that was evident this past Christmas,” said Walter F. Loeb, a retail consultant in New York. “In some ways, the recession is permanent. Lower spending is here to stay, and consumers want fashion, low prices and quality.”
William N. Smith, who follows retailing for the investment firm Smith Barney, Harris Upham & Co., said, “It sounds simplistic, but the key is having the right merchandise and providing value for the money. We have a financially stressed consumer.”
That was evident weeks before retailers tallied their Christmas results. Americans began spending less last fall as the economy sagged and big companies, including General Motors Corp., announced huge layoffs.
Sears, for instance, said “sales for the holiday season started strong after Thanksgiving but weakened considerably through most of December.” A hoped-for surge just before Christmas did materialize by most accounts, which helped some stores post at least modest gains over their poor showing a year earlier.
The biggest retailer, Wal-Mart, said its “same-store” sales in December--representing stores open at least a year--rose 5% from a year earlier, and Kmart reported a 4% increase.
(The same-store results are seen as more precise in measuring a store’s year-to-year performance. That’s particularly true this year, because last month’s sales were compared to the depressed levels of Christmas, 1990, when the nation was traumatized by the Gulf War.)
During the past 11 months, Wal-Mart’s total sales jumped 35% from a year earlier to $40.6 billion, making it probable that the Bentonville, Ark.-based company’s sales for its fiscal year ending this month will surpass $50 billion.
Other notable gainers in December included Gap, whose same-store sales rose 14%; Clothestime Inc., an Anaheim-based discount apparel firm, up 17%, and Limited Inc., with a 3% increase. Toys ‘R’ Us Inc. on Thursday reported an 8% gain.
Penney’s same-store sales, meanwhile, inched up only 0.1% from a year ago, while Sears had a 2% decline. May Department Stores Co.’s sales slipped 1%, and Woolworth Corp. reported a 0.5% drop.
Dayton Hudson Corp., the Minneapolis-based holding company for the Target discount chain and Mervyn’s apparel stores, said its sales rose a meager 1.5%. Target did well, but Mervyn’s did not. “Mervyn’s was hardest hit in its California-Arizona-Nevada markets, where it experienced double-digit decreases during the month,” Dayton Hudson President Stephen E. Watson said.
The problems at Mervyn’s and Woolworth, which aren’t known for high prices, shows that discounting alone will not be enough to attract customers in the 1990s, said Neil Thall, a retail consultant in Atlanta.
“Value doesn’t just mean cheap,” he said. “It means you have to have something people want to buy. You can succeed with fashion, value or service. If you’ve got any one of those, you’ll do well, and if you have two, you’ll vanquish the market.”
Stores such as Woolworth, Penney and Sears are struggling because each has failed to persuade Americans that it’s strong in one of the three categories, Thall said.
Kurt Barnard, president of Barnard’s Retail Marketing Report newsletter in New York, said the big cutback in consumer spending actually began in early 1988, and he asserted that “people will not be in any mood for a long time to spend freely and to whip out their plastic cards at the drop of a hat.”
As a result, he said, “all the stores that up until now had a dominance in the upscale market will have to learn to adapt themselves to the fact that many of their customers continue to have the Neiman Marcus taste but the Kmart budget.”
Winners and Losers
Christmas sales were generally weak for most retailers, but the few posting gains did so with strategies that will probably make them standouts for most of the 1990s. Here is a list of the winners and losers and their strengths and weaknesses.
% change % change in same- in stock store sales* Friday price from Winners from year ago stock price a year ago Wal-Mart + 5% $57.75 +93% Quality goods, low prices, service Kmart + 4% $47.375 +73% Wide selection, low prices, modernizing stores Gap +14% $58.75 +248% Moderately priced quality apparel, attractive display Clothestime +17% $9.25 +429% Discounted designer-name women’s apparel
% change % change in same- in stock store sales* Friday price from Losers from year ago stock price a year ago Sears - 2% $38.50 +50% Uncompetitive prices, poor product mix J.C. Penney +0.1% $55.00 +23% Still persuading public that it has affordable, quality good May Dept. Stores - 1% $53.625 +32% Expanding moderately priced goods, upgrading servic Woolworth -0.5% $28.125 -3% Not distinguished in selection or value.
* For December at stores open at least one year.
