CONSUMER SPENDING SLOWDOWN : December Retail Gains the Worst in a Decade
Despite heavy price cutting, holiday sales fell below even the pessimistic forecasts of analysts, as the nation’s retailers Thursday posted the lowest December increases in a decade.
However, retailers in Southern California fared slightly better--another sign that the region is recovering.
Wal-Mart and Federated Department Stores were among the chains reporting disappointing sales increases. Many others--J.C. Penney among them--recorded sales decreases during the month.
December sales at stores open at least a year--known as same-store sales--rose only 1.7%, the lowest rise in 10 years, according to the Bloomberg same-store sales index and Stone & McCarthy Research Associates. Another indicator, from Salomon Bros. Inc., showed a 1.8% gain, the smallest for a December in the 10-year history of the index. Some retail industry analysts said the increase nationwide ranged from a meager 1% to 1.5%.
In late November, some economists were predicting same-store holiday sales increases of about 4%. Same-store sales are considered the best measure of retail strength because they do not include stores that opened or closed within the last 12 months.
“This was an extremely difficult holiday season for retailers,” said industry analyst Walter Loeb of Loeb Associates in New York. “Bad weather was a factor in the East. But there was general concern about employment and personal debt. Considering the heavy price markdowns and the [sales] results, we’ll be seeing some bankruptcies and consolidation in this industry.”
Sales gains in Southern California appeared slightly stronger. Analysts estimated a 3% increase, and Bullock’s, Mervyn’s and Sears reported improvements in the region.
Continuing its comeback, Sears reported a December sales gain of nearly 7% nationwide, far outpacing an industry that relies heavily on holiday sales for annual profits. Analysts attributed the increase in part to strategic moves that included store remodelings, expanded apparel lines and an ad campaign designed to lure women.
Wal-Mart, the nation’s No. 1 retailer, reported a 1.1% increase in December sales. Discount rival Kmart said sales rose 4.5%, but heavy price cutting accounted for much of that increase.
Lackluster demand for clothing hurt specialty apparel chains. Sales decreased 5% at the Limited for the month and 13.8% at Ann Taylor. Sales declined 4.8% at Edison Bros., which recently began to reorganize under Chapter 11 of the U.S. Bankruptcy Code.
Department stores also performed poorly. The 4.5% sales decrease recorded by J.C. Penney was unexpected. St. Louis-based May Department Stores--operator of the Robinsons-May chain in California--said its department store sales rose 2.3% in December. Overall, including its shoe store division, May’s sales rose 1.4%.
Minneapolis-based Dayton Hudson Corp. said its department store division--including Hudson’s and Dayton’s--had a 1.7% decrease in sales. Overall, the company had a 3% increase in sales because its Target division had a 5.3% increase.
Sales at Dayton Hudson’s Mervyn’s stores decreased 1.4%, but sales at California locations were 5% higher than for the rest of the nation--another sign of some resurgence in the Golden State. More than a third of the 295 Mervyn’s stores are in California.
Another chain with a major California presence--Cincinnati-based Federated Department Stores--said its sales rose 1.3%, compared with the same period a year ago. Federated operates Bullock’s, Broadway, Macy’s, Bloomingdale’s and other chains. Allen Questrom, chairman and chief executive, called the results disappointing. He said the general weakness in the economy reflected in fourth-quarter sales poses a concern for 1996.
This was the final December sales period for the Broadway Stores chain, which was recently acquired by Federated. Federated plans to convert most of that chain’s Broadway, Emporium and Weinstocks stores into Macy’s and Bloomingdale’s this year. Sales at Broadway Stores were down 6.5% in December.
This was also the final holiday season for Bullock’s, a 21-store chain in Southern California also operated by Federated. Bullock’s, which will also be converted to Macy’s this year, finished relatively strong. “In a very tough December, Bullock’s performed better than our Northern California stores,” said Michael Steinberg, president of Macy’s West, a San Francisco-based division that operates Federated stores in California and four other Western states.
Sears stores also performed well in Southern California. Holiday sales in the region were 30% higher than in the rest of the nation, said Robert Mettler, president of Sears’ apparel and home fashions group. Analysts said Sears’ performance in Southern California and the rest of the nation is the latest sign of a retail resurrection for the venerable chain.
Once the nation’s leading retailer, Sears had fallen behind Wal-Mart and Kmart, reaching its nadir with a loss of $3.93 billion for 1992. Sears found new direction that year by hiring former Saks Fifth Avenue chief Arthur Martinez to head its merchandising operations.
