Holidays are deemed ‘modest success’ for retailers
Wrapping up a good but not outstanding holiday season, the nation’s retailers reported solid December sales that underscored shoppers’ resilience amid tough economic conditions that are expected to persist well into the new year.
“Generally speaking, holiday 2011 has to be considered a modest success given the soft economic backdrop coupled with the highly promotional environment retailers are operating under,” said Ken Perkins, president of research firm Retail Metrics Inc. “Consumers were the beneficiaries of great deals, while retailers generated solid top-line increases, albeit at the expense of margin.”
The retail report came on a day of positive economic news. A report by payroll processor ADP showed that private-sector employment surged by 325,000 jobs in December, outpacing economists’ expectations. And the Labor Department estimated that initial jobless claims last week fell 15,000 from the week before.
December sales at 22 major chain stores rose 3.4% year over year, roughly in line with expectations, according to a tally by Thomson Reuters released Thursday. Nearly two-thirds of retailers beat expectations last month, but misses were seen by Kohl’s Corp., Target Corp. and Gap Inc.
For November and December combined, retailers posted a 3.4% year-over-year increase, Perkins said. That was lower than the 4% year-over-year growth the industry reported for the 2010 holiday season, he said.
It was also a monster Christmas for e-commerce, with online retail spending for the two-month holiday season increasing 15% from a year earlier, to $37.2 billion, market research firm ComScore Inc. said this week.
The last two months of the year are a crucial time for retailers, with some making as much as 40% of their annual revenue during the season.
Merchants are now settling into the usual post-holiday lull, with many lowering prices even further to clear inventory and prepare for the next spike in consumer spending, typically before Easter. Many stores at Los Cerritos Center were touting big discounts this week, including a “twice upon a year sale” at the Disney Store and a “hot mess clearance” at Hot Topic.
After redeeming gift cards and exchanging unwanted presents, many consumers say they plan to return to frugality.
“I’m pretty much buckling down the next couple of months, just getting over Christmas,” said Sandy Cunningham, 44, a healthcare consultant who was at the mall Wednesday looking for a duffel bag for an upcoming family trip. “I just saw a shirt I really, really liked at Nordstrom, but I didn’t buy it. I was smart.”
Retail experts said deep discounting and promotions played an important role in luring customers into stores this holiday season. A warmer-than-usual winter hurt sales in cold-weather categories at some chains, said Michael Niemira, chief economist at the International Council of Shopping Centers.
Among last month’s best retail performers were teen retail chain Zumiez Inc., which reported a sales bump of 10%, off-price retailer Ross Stores Inc., where sales rose 9%, and upscale department store chain Nordstrom Inc., up 8.7%.
Sales at Macy’s Inc. rose 6.2% thanks to “very strong” business at Macy’s and Bloomingdale’s department stores, Chief Executive Terry J. Lundgren said in a statement. He said the company implemented “key strategies at a very high level in spite of weak economic conditions.”
“We are solidly on track to exceed our expectations for same-store sales in the fourth quarter,” Lundgren said. “We have great confidence in the future.”
Several retailers, including Macy’s Inc., Limited Brands Inc., Zumiez and Ross, raised their fourth-quarter earnings guidance Thursday. But in a sign that the holidays brought mixed results for the retail industry, chains such as Kohl’s, Target and J.C. Penney Co. lowered their profit expectations for the fourth quarter.
December’s weakest results came from San Francisco apparel giant Gap Inc., which reported a sales decline of 4%, missing expectations for a 1.3% drop. Teen chain Wet Seal Inc. saw sales decrease 3.7%; analysts had expected a 1% decline.
Results were based on sales at stores open at least a year, known as same-store sales and considered an important measure of a retailer’s health because it excludes the effect of store openings and closings.
“We expected December to be highly promotional, and while we competed aggressively across our brands, our performance was below our expectations,” said Glenn Murphy, chief executive of Gap Inc., which has struggled with sluggish sales for several quarters. “That said, we are encouraged by bright spots across our business, and we’re clear and focused on what needs to be fixed in order to improve our sales trend in 2012.”
At Los Cerritos Center this week, Bellflower resident Kelly Hiebert said she overspent during the holidays, buying about $1,000 worth of presents for each of her two daughters — double what she had budgeted — and charging many of her purchases to her credit card.
Despite vowing to cut back, the medical offices clerk conceded she was already having trouble. At the shopping center, Hiebert, 39, had intended to just return and exchange some gifts with her 13-year-old daughter, but she wound up browsing for shoes and handbags at Sears.
“I ended up spending anyway,” she said. “Twenty dollars here, twenty dollars there — then I find I walked out spending $70 just to return stuff.”
