Stores falling short of sales goals
Bursts of spending marked both ends of the holiday shopping season, but retailers will probably still be disappointed when the fourth quarter is over.
Sales at stores open a year or more rose 2.8% last week, the International Council of Shopping Centers said Wednesday, and Michael Niemira, the group’s chief economist, predicted the total for November and December combined would be “a tad below” 2.5%, which is what Niemira had forecast would be the gain over last year.
Looking at a different time frame and a broader measure, MasterCard Advisors said retail sales from the day after Thanksgiving through Christmas Eve were up 3.6%, not a strong showing compared with recent years. And Redbook Retail Inc., focusing solely on December, said same-store sales had ticked up only 1.3% so far this month, even though stores extended hours and slashed prices to spark last-minute buying.
So look for more cutting between now and New Year’s Eve, the last-gasp opportunity for retailers in 2007.
“Shopping traffic will be very high over the next week,” said Michael McNamara, vice president of research and analysis for MasterCard Advisors.
Profits, though, might not be. Target Corp.’s shares fell 2.5% to $51.16 as investors reacted to its revision on Christmas Eve of its expectations for December sales. The company said they might fall 1% rather than rise as much as 5%. By contrast, Amazon.com Inc.’s shares climbed more than 2% to $92.85, up $1.84, after the online retailer said this holiday season had been its strongest ever.
For bricks-and-mortar stores, sales took off on the day after Thanksgiving as special deals sparked spending, and then subsided. As Christmas neared and stores slashed prices further, shoppers headed back to the malls. The spending reached a peak last weekend when sales rose an estimated 18.7% from Friday through Sunday, according to ShopperTrak RCT Corp., which monitors more than 45,000 retail stores.
Chains are trying to coax money from people who are coping with higher fuel and food prices, a slumping housing market and rising mortgage payments. At the same time, retailers must pay more to transport goods.
They have had trouble moving some types of merchandise this year. Women’s apparel sales slipped 2.4% in the period covering the day after Thanksgiving to Christmas Eve, according to MasterCard Advisors’ SpendingPulse report. Sales of luxury goods declined 1.9%.
The strongest category was e-commerce, which jumped 22.4%.
As the sales results dribble in, analysts are wondering about profits and looking to February, when most retailers unveil fourth-quarter earnings.
Between now and then, stores will continue marking things down. “It may be a better price, but you may not want it,” warns Phil Rist, vice president of strategy for BIGresearch, which surveys 8,000 shoppers a month.
The week after Christmas has become increasingly important for retail chains over the last few years. New spending -- expenditures not linked to gift card redemptions -- jumped 30% in the seven days after Christmas last year from 2003, McNamara said. Some stores already will look more like springtime than winter this week. Upscale leather goods seller Coach Inc., which doesn’t mark down merchandise, began resetting its stores with spring merchandise Tuesday in anticipation of the post-Christmas rush. Many retailers for teens also have hauled out next season’s offerings because teens treat gift cards “like found money,” said analyst Christine Chen of Needham & Co.
“You’ll certainly see the older merchandise that didn’t sell get promoted even cheaper, but you’ll also see new merchandise,” Chen said. “Most teenagers will immediately spend their gift cards. Older customers are more likely to wait.”
The $25 Target gift card that 73-year-old Wanda Lawler received this year isn’t burning a hole in her handbag. She’ll probably redeem it in “a couple weeks, maybe,” the Lakewood retiree said. “I just usually go when I go.”
Gift cards have altered the holiday shopping season, pushing sales into January. Retailers can’t log gift cards as revenue until they’re redeemed.
Analysts and investors will get a better read on how the season went Jan. 10, when retailers report December same-store sales.
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