For Stores, It's Better Late Than Never

By ABIGAIL GOLDMAN

Jan. 8, 1999 12 AM PT

TIMES STAFF WRITER

Last-minute buyers surprised retailers by making it a healthy--and in a few cases, stellar--Christmas holiday shopping season, according to December sales reports issued Thursday.

And, for the first time, holiday shoppers using a mouse and a modem made a significant difference in some sellers’ bottom lines.

Contrary to some naysayers who warned of an Asian crisis-inspired slowdown for the West Coast, California did at least as well as the rest of the country, many retailers said. The state wasn’t affected by a warm spell on the East Coast that proved troublesome to retailers trying to move cold-weather wear in the early part of the season.

Goldman, Sachs & Co., the New York investment house, estimated sales grew by 5.2% over December 1997 at stores open at least a year. Those so-called same-store sales are considered the best measure of retail performance.

Bank of Tokyo-Mitsubishi gave the 1998 holiday season even better marks, calculating December’s sales increases as 5.6% above 1997, making it the best holiday season for retailers since 1992. Analysts had expected sales increases of 4% to 5%.

One surprise was the strength of specialty apparel. While specialty chains such as Gap and Ann Taylor have been outperforming competitors in recent months, consumer demand for such clothing exploded in the final weeks of the holiday season, analysts said.

“Whereas the trend was expected, the dimension was a surprise in those categories,” said Tom Tashjian, retail analyst at NationsBanc Montgomery Securities in San Francisco.

In one striking example, Florida-based Chico’s, a women’s apparel store that targets the 35-and-older market with unstructured, folk art-inspired separates in 160 stores nationwide, reported a whopping 42% December sales increase in stores open at least a year.

Gap Inc. reported a 19% rise in same-store sales.

Other specialty stores--consumer electronics, housewares and jewelry--also did particularly well, with Circuit City posting an 11% gain. Discounters such as Wal-Mart, the country’s largest retailer, also had a strong season. Wal-Mart reported a 9.4% gain over last year.

But the same consumers who flocked to the two ends of the retail spectrum continued an apparent trend of avoiding the middle: J.C. Penney saw same-store sales slide 7.6%, while Sears, Roebuck & Co. reported a scant 0.3% rise.

“They were squeezed,” said Richard Giss of Deloitte & Touche’s retail services group in Los Angeles. “The discounters did so well they pulled the low end away from Penney’s, and those who weren’t on the low end really were going for the higher-fashion appeal and the label appeal of higher-end department stores.”

Penney, in fact, warned that quarterly earnings would be below expectations. Penney’s stock slid $3.19 to $43 on the New York Stock Exchange on Thursday. After the market closed, Penney received another potential blow when credit-rating agency Moody’s Investors Service said it may downgrade the company’s debt rating, which is now mid-range quality.

Meantime, online sales over the holiday season reached $1.96 billion, according to BizRate.com, which surveyed 33,000 shoppers during the Christmas season. Online shoppers were also earlier than their counterparts in the malls, the group reported, with online buying peaking between Dec. 14 and Dec. 20.

The Internet was at least part of the reason companies such as Toys R Us and Borders booksellers found a lump of coal, rather than a gift, in their company stocking.

Borders, which operates 1,100 stores, saw same-store sales at its Waldenbooks fall 0.5% and sales at Borders stores rise a modest 2% to 2.5%. Borders faced heavy competition from Internet dealers Amazon.com Inc. and Barnes & Noble.

Toys R Us, the largest toy retailer in the country, said same-store sales fell 7% as it faced tough competition from both the Internet and discounters.

Helped by last-minute markdowns, Federated Department Stores Co., which operates Bloomingdale’s and Macy’s, among other top-of-the-line mall anchors, saw same-store sales rise 5.7%. May Department Stores Co., parent of Robinsons-May and others, had a 4.4% increase. Dayton Hudson Corp., parent of Target and Mervyn’s, posted a same-store increase of 6.5%.

Markdowns widely instituted just before and right after Christmas were not expected to take a big bite out of retailers’ profits, analysts said, because the stores had planned for them.

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Wall Street’s View of Retail

Investors have bid specialty-retailing stocks sharply higher in recent months, while many department store stocks have languished on concerns over sales trends. Weekly closes and latest for the Standard & Poor’s department store index (which includes such stocks as Nordstrom and J.C. Penney) and the S&P; retail-specialty index (which includes such shares as Home Depot, Circuit City and Costco):

S&P; department store index:

S&P; retail-speciality index

Thursday: 2,536.99

Thursday: 1,941.83

Scoring the Season

Here’s a look at the winners and losers of the holiday season. Percentages reflect December sales of stores open at least a year compared with December 1997.

THE BIG WINNERS

Gap: +19.0

Ann Taykor: +15.9

Lane Bryant: +15.0

Tiffany: +12.0

Circuit City: +11.0

Best Buy: +10.5

Restoration Hardware: +10.2

Express: +10.0

Wal-Mart: +9.4

BIG LOSERS

J.C. Penney: -7.6%