Bargains Add Suspense to Retail Data
Retailers, buoyed by the late burst of post-holiday buying, braced themselves for a suspenseful week of reckoning as bargain hunters flooded Southland malls and discount centers on the final weekend of the Christmas shopping season.
Today, the nation’s largest shopping mall association will release Christmas sales figures, and on Thursday several major retailers report their December performance. This along with data coming later in the month will give the industry its annual scorecard and provide one of the first economic signposts for 1999, which economists are already calling a year of uncertainty.
Optimistic analysts, including Richard Giss of Deloitte & Touche’s retail services group in Los Angeles, expect 4% to 5% growth in overall U.S. holiday sales and a slightly bigger boost for California retailers. Driving the growth were consumer electronics, jewelry, housewares and furnishings, Giss said.
Others lamented that the global economic downturn is already affecting shoppers’ moods. Also, deep discounting, to which most stores resorted this season to lure choosy shoppers, has cut into revenue, even though unit or “physical” sales probably grew, said Bear, Stearns & Co. analyst Dana Telsey.
“More units are walking out the door but not necessarily at higher prices,” Telsey said, in reference to consumers’ late-season purchases of discounted goods. Cold weather in the Midwest and East last week came too late for retailers to recoup losses on outerwear, boots and sweater inventory, she said.
Whether retail sales in Southern California will outpace the nation is also subject to debate. William Ford, senior economic advisor at Houston-based TeleCheck, expects California and the rest of the West Coast to lag the nation’s Christmas sales because the Asian crisis and energy and aerospace layoffs have hurt spending power.
“The area has a touch of the Asian flu and a number of industries have been hit,” said Ford. Through Dec. 24, TeleCheck reported that check authorizations at West Coast stores open at least a year rose only 1.5% over last year, lower than the 2.5% growth across the country. TeleCheck will release data for the entire shopping season today.
Wherever the sales data point, it could provide contradictory grist for analysts’ research. What seems certain is that booming home sales in California and across the nation are lifting sales of housewares and furnishings through the roof.
But discount chains such as Wal-Mart and Kmart and specialty retailers--not department stores--seem to be the primary beneficiaries.
Specialty retail chains catering to housewares such as Williams-Sonoma, Crate & Barrel and Restoration Hardware have enjoyed brisk sales growth, Bear Stearns’ Telsey said. “But department stores are hurting. They are comprised of brands of manufacturers and they’re all carrying the same things. Consumers want something different.”
Shoppers are also persistently seeking out bargains, which explains the success this season of Wal-Mart, Kmart and Dayton Hudson Corp.’s Target stores, which all are expected to post good gains, according to analyst Kurt Barnard, president of Barnard Retail Trend Report in Upper Montclair, N.J.
“People were willing to spend, but without question they wanted bargains and they kept shopping around until they found what they thought was good value,” Barnard said.
Sales of consumer electronics also are expected to have surged, lifted by falling prices and new digital technology in gadgets like digital versatile disc (DVD) players, camcorders and televisions. Dow Stereo-Video, a San Diego retailer, reported that customers lined “10 deep” Sunday afternoon at its Balboa Avenue store.
Yet apparel and footwear sales are expected to disappoint, especially high-end items. That’s why department stores may only see 0.5% year-to-year Christmas season growth in stores open a year or more, below the 2.5% that many had stocked up for, said Tom Tashjian, retail specialist at NationsBanc Montgomery Securities in San Francisco.
Tashjian said the department store malaise has been caused by worsening economic indicators that divert more consumers to discount chains.
“Declining consumer confidence, signs the economy is slowing down and fewer jobs getting created, all that is tallying up to less spending power out there,” Tashjian said. “We saw extraordinary retail sales gains over the first half of the year, and now it’s less robust.”
Barnard saw a longer-term demographic trend going against department stores, specifically the aging of the U.S. population. That, combined with a booming real estate market, is giving the home furnishings industry “every reason to be happy,” he said.
“Americans are getting older and at this age, we become a little less prone to extravagance. They find that their peace and happiness lies not in another $3,000 doodad but in a pleasurable and comforting home ambience, in buying something that’s not going to go bye-bye but be with us for a while,” Barnard said.
And yet, sales of the ultimate extravagance, jewelry, may be up as much as 9% this year, according to the International Council of Shopping Centers in New York. The ICSC’s survey of 48 malls across the nation showed that Christmas sales through Dec. 24 were up 5.3% over last year. The ICSC will report sales data for the entire season today.
Analysts will also have to account for the Internet factor, which is skewing perceptions of the retail environment, they say, to a far greater degree than its actual sales might warrant.
For all the brouhaha, Internet sales still account for no more than $3 billion, or 1.7% of the $170 billion in Christmas season retail sales, Tashjian said.
“Internet sales may take more share over time, but all this excitement to the contrary, it isn’t going to make stores go away. People go shopping for the social experience, to be with other people, to touch and feel the merchandise. You can’t sign on and do that,” Bear Stearns’ Telsey said. “Not yet, anyway.”
