1997 Rings Up Disappointing Sales
Shoppers flooded malls and shopping centers across Southern California and the nation Friday, the first day of post-Christmas clearances and the final salvage opportunity for a retail industry that has suffered through a disappointing holiday sales season.
However, the slowdown in sales growth--the third consecutive year of modest sales gains--is a sign of seasonal caution that reflects a fundamental shift in consumer attitudes toward year-end spending, retail industry analysts say.
They had expected a moderately strong holiday sales season because unemployment and inflation have been low and the economy has been strong throughout the year. However, analysts now believe that consumers are more interested in investing, saving and paying down high personal debt. They also say consumers are feeling slightly nervous in the wake of stock market fluctuations and the turmoil in Asia.
Although many analysts had predicted a holiday season spending increase of 3% to 5%, they now say the sales gains will be 2% to 3%. This kind of showing, coming on the heels of a modest 3.5% sales increase in the 1996 holiday season, would fall far short of the 8% increase in 1992 and the year-to-year gains of the 1980s, when increases like the 10.6% rise in 1988 were the norm.
“Christmas is no longer the hot selling season it once was, and retailers will have to face up to new realities and find ways to attract more customers throughout the year,” said Kurt Barnard, a New Jersey-based retail economist. “Consumer attitudes have changed and the year-end herd mentality has ended.”
In a bid to reduce its reliance on year-end sales, the retail industry has made a more concerted effort to encourage consumers to shop for gifts earlier, offering sales promotions in October and November. But that effort may have backfired this year.
“Retailers hurt themselves by extending the sales season because that makes people more immune to hype,” said Richard Giss, a retail analyst at the Los Angeles offices of Deloitte & Touche. “It was a disappointing season.”
*
December sales are crucial for retailers. Some merchants generate 25% to 30% of their annual revenue during the period. And the post-Christmas sales season has become increasingly important in recent years as more bargain-hungry consumers--as well as those seeking refunds and exchanges--descend on shopping centers between Dec. 26 and Jan. 1. Last year, 11% of all late-season sales were generated during the six days after Christmas.
Those crowds were evident Friday as consumers flocked to malls and other shopping venues for bargains. Despite the jammed parking lots, retailers and mall operators were not any more upbeat about their their expectations for the entire month.
Jim Mance, general manager of the Ontario Mills mall, said he would “be happy” if seasonal sales in 1997 match those of last year, just after the mall’s November 1996 grand opening.
Century City Shopping Center in Los Angeles also had a strong 1996--a sales increase of about 4%--after the grand opening of its Bloomingdale’s store in November of that year. But Century City officials don’t expect those kinds of increases this year.
“I think we’ll have a small increase of 2% to 3% this year,” said Doug Roscoe, general manager of the Century City center. “The Bloomingdale’s opening created more interest last year, and to have any increase is good.”
Many merchants have adjusted to the sales slowdowns by stocking less merchandise, but they still have excess inventory because many failed to meet their seasonal sales goals. “Consumers were not in a heavy spending mood and retailers were not prepared for this situation,” said Ira Kalish, a retail economist at the Los Angeles offices of Price Waterhouse.
Kalish said the strong national and regional economy masked the fact that consumers are worried about high levels of personal debt and the stock market. Also, there are some concerns about job security in wake of recent layoffs at high-profile companies such as Levi-Strauss, Kodak, Singer and Kimberly Clark, said Kalish.
Analysts have also noted that the population is aging and that older consumers tend to spend less on clothes--normally a strong holiday-season seller--and more on non-store items such as travel.
Friday’s turnout in Southern California and other parts of the country was at least as large as that of a year ago, though the size of post-Christmas crowds is not usually a good indicator of sales activity. Many join the mall masses to return or exchange unwanted gifts.
At Northridge Fashion Center, for example, Schovan Parker of Northridge arrived at the mall early to exchange a gift and to check out the sale at Robinsons-May, where she bought a $110 men’s designer warm-up suit for $30.
Similarly, Beverly Diaz of Simi Valley showed up at the mall to return gifts at Macy’s.
Others traveled to the Northridge mall but planned to spend little. Among them were Debbie Saenz of North Hills.
“I spent more last year than I did this year,” Saenz said, resting on a bench in front of JCPenney. “I have more important things to spend my money on. My family decided that next year we are only going to buy gifts for the kids and invest the rest.”
Retailers tried hard to overcome that cautiousness. From downtown shopping districts in the Midwest to ritzy shops along New York’s Madison Avenue to the sprawling malls in Southern California, bargains abounded.
In Southern California, for example, Sears, Macy’s, Robinsons-May and JCPenney were offering price cuts of 50% Friday.
“It has not been a stellar year and it’s more promotional than last year,” said Michael Steinberg, chairman of Macy’s West, the San Francisco-based operator of the chain’s Western stores.
For some, Friday was a good opportunity for a personal spending spree. Kevin Hampton of Newport Beach had already purchased gifts for 20 family members earlier in the shopping season. He was out for himself on Friday.
“I’m looking for values and a few other things,” he said, quickly wending his way through the mass of humanity in the men’s department at Nordstrom’s South Coast Plaza store. His haul: 18 dress and golf shirts, about half of which were on sale, for $749.
*
Others arrived very early for the bargains. Hilda Garabedian of Reseda was in line at the Disney store at Northridge Fashion Center at 6:45 a.m. When the Mickey Mouse clock struck 9 a.m., Garabedian crossed the threshold and headed straight for a toddler clothes rack.
“You just don’t get 50% off Disney stuff all the time,” she said.
Some shoppers were early birds with a budget. For example, Kathleen Sheffield, a Santa Ana cellular phone saleswoman, was among the 200 shoppers who were there for the 9 a.m. opening bell at the Container Store in Costa Mesa, whose Christmas gift wrap and decorations were 50% off.
“It’s always better to buy it now so you can save money next year,” said Sheffield.
Like many consumers, Sheffield said she and her husband tried to rein in their purchasing this season, spending about $400.
That consumer caution hurt specialty apparel chains most as seasonal demand for clothing wilted. Gap Inc.--operator of the Gap, Banana Republic and Old Navy chains--has had a good year and is expected to report strong seasonal gains. The Old Navy chain, which sells apparel at lower prices, will account for much of that improvement.
However, most specialty apparel chains had a difficult season. For example, sales at Ann Taylor stores and at Donna Karan International--operator of the DKNY stores--have been lower than expected.
Department stores also struggled. Some analysts are predicting a 2% sales decline for J.C. Penney. Some analysts believe seasonal sales at Sears will be flat, virtually even with last year’s levels. Analysts have predicted that sales at two of the largest department store operators--May and Federated--will rise a modest 2% to 3%. Federated operates Macy’s and May owns the Robinsons-May chain.
In contrast, some upscale chains had a fairly successful year as demand for items with lasting value--jewelry, for example--rose dramatically.
Meanwhile, the home store business flourished as consumers dressed up their bedrooms, kitchens and bathrooms with new furnishings. Among those emerging as sales leaders in home furnishings are stores such as Bed, Bath & Beyond, Linens ‘n Things and Restoration Hardware, a chain that offers home furnishings and novelty gift items as well as some tools.
Demographics explain the demand for home furnishings, analysts say. Baby boomers, for the most part, have moved from their starter homes into dream homes and are more willing to spend on furnishings and tools to make improvements, analysts said.
*
Times staff writers Karima A. Hayes in the San Fernando Valley and Russ Stanton and Daryl Strickland in Orange County contributed to this story.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Seasonal Wrap-up
Much sales hoopla surrounds Dec 26 and the following clearance days. But in a typical year, the post-Christmas week is only the fourth-busiest period surrounding the holiday.
SHARES OF HOLIDAY SALES
Dec. 16-24: 41%
Dec. 9-15: 22%
Dec. 2-8: 16%
Dec. 26-31: 11%
Thanksgiving Weekend:10%
* Source: International Council of Shopping Centers. Note: 1996 figures.
