Same-Store Sales Rise, but It’s Not Much of a Gift for Retailers
Sales at established retail stores rose 5.7% in the run-up to Christmas, according to a closely watched index released Tuesday, but analysts said the number amounted to little more than shiny wrapping paper.
Although the gain was impressive on its face, it was up against decidedly weak year-earlier results. Last year’s 1.7% sales increase for the week ended Dec. 20 contributed to the smallest improvement for the month of December in three decades.
Retail experts still expect 2003 to be the strongest holiday sales season since 1999, but “that’s not saying much,” said Michael Niemira, chief economist and research director of the International Council of Shopping Centers.
The group’s sales index, compiled in conjunction with Wall Street investment firm UBS Securities, tracks spending at thousands of stores nationwide, from department chains such as Federated and May to discounters Wal-Mart and Target to apparel merchants such as Gap Inc.
The ICSC survey measures sales at stores open at least a year, a key measure of growth for retailers. Last year, these so-called same-store sales rose just 1% for all of December.
The just-concluded weekly results are an important indicator of how the entire season will stack up because they include receipts from the final weekend before Christmas, including Saturday, historically the busiest shopping day of the season.
Nationally, retailers rang up an estimated $7.3 billion in sales Saturday, 4.9% more than the previous year, according to ShopperTrak, a Chicago firm that collects sales data from 30,000 U.S. stores.
The figures released Tuesday did not prompt major industry groups to alter their projections for the season. Niemira said he was sticking to his forecast that same-store sales would rise 4% in the holiday period, based on his survey of 79 chain-store operators.
The most definitive picture of how retailers will fare this season won’t come into focus until Jan. 8, when the major chains release sales totals for December.
In the meantime, merchants increasingly are lowering prices in the season’s home stretch in an attempt to drive sales.
“They really have to do it,” said J. Elias Portnoy, a retail marketing expert. “It’s survival mode.”
Despite an abundance of markdowns, crowds seemed lighter than usual Saturday morning at Del Amo Fashion Center in Torrance, said Kathy Manuel, a makeup artist at Macy’s.
Shoppers want to get in and out of stores quickly and buy only what they must, treating the shopping experience “like a burden,” said the 31-year-old Westchester resident, who has worked in retailing for 15 years. “They look for value; they want free gifts. They’re buying what they need, and that’s it.”
Brian Sturz said he was at Del Amo on Saturday for one reason: “desperation.” The 50-year-old Palos Verdes podiatrist was just starting his holiday shopping, and he wasn’t about to draw out the process. After buying a shirt, a few books, a couple of toys and a hockey stick, he was ready to call it quits.
“I’m going to get some cards, and then I’m done,” he said. “Whether I’m done or not.”
The season has had some bright spots, including the sales of luxury goods.
The overlap of Christmas and Hanukkah seemed to help drive sales at Beverly Center, said John Giurini, a spokesman for the West Hollywood shopping center. Most mall merchants surveyed reported sales increases of 4% to 6% over last year, he said.
Discounters, meanwhile, are struggling to gain traction.
Wal-Mart Stores Inc. said same-store sales through Friday were tracking at the low end of its anticipated 3%-to-5% range for December. Target Corp.’s comparable-store sales were running below plan for the week and the month. The Minneapolis-based chain had predicted sales would rise 5% to 7% for its Target stores and about a percentage point lower than that for the overall company, which includes Hayward, Calif.-based Mervyn’s.
A growing number of consumers are taking the easy way out this year, buying gift cards or certificates that recipients can use to get what they want at a later date.
The purchase of gift cards is expected to make up 8% to 10% of all holiday dollars spent this season, Niemira said, up from 5% a year ago. That could put a dent in this year’s total sales numbers because retailers don’t count gift-card sales until they’re redeemed.
On the other hand, gift-card redemption could stretch out the shopping season, causing a “spillover effect” that could allow retailers to rack up additional sales in January, Niemira said.
Last weekend probably disappointed many retailers that were hoping the days leading to Christmas would “bail them out,” said Marshal Cohen, chief industry analyst for NPD Group, a market research firm in Port Washington, N.Y.
Retailers generally have not had the “numbers they had hoped for” thus far in December and have had to cut prices more than expected, especially since Saturday, Portnoy said.
Many promotions that retailers have unfurled this season were planned in advance, said Scott Krugman, a spokesman for the National Retail Federation, the industry’s largest trade group. But now they are going “off plan,” he said. Unlike previous years, a national terror alert issued Sunday could affect traffic at many stores in the days before Christmas.
“We’re starting to see the heavier promotions come out now,” Krugman said, a process that will continue at least through January.
Still, lean inventories should mean that markdowns won’t be as painful to retailers’ profits this year as they were in 2002, experts said.
