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New York — It’s high-anxiety time for retailers struggling in a tough marketplace as the number of selling days dwindles down toward Christmas.
With holiday sales hardly off the ground, merchandisers hope that next weekend triggers a last-minute bonanza that will help them meet their revenue projections.
Business last weekend “was OK, but nothing earth-shattering,” said Bob Goodfriend, chief executive officer of Goody’s, an Alcoa, Tenn., specialty apparel chain. “It’s extremely competitive and we’re fighting for every dollar. Every time it looks like business is going to blow open, it settles back down.”
This story first appeared in the December 14, 2004 issue of WWD. Subscribe Today.
Mother Nature may give retailers an assist. Lower temperatures are forecast in much of the Northeast and Midwest, which could boost sales of categories that have been lagging: coats, furs and cold-weather accessories. Heavier traffic last weekend, including many foreign tourists reaping the discount benefits of the weakened dollar, suggests that consumers are finally getting gift-minded. And luxury is maintaining its sizzle even as other sectors struggle.
Wal-Mart reported in its weekly sales summary, which included the period through Friday, that general merchandise sales were not as strong as those for food-related items, and sales for winter-related items were also below expectations. The West was the Bentonville, Ark.-based retail giant’s strongest region for the week, with same-store sales estimated to be in the 1 to 3 percent range for the December period.
Richard Hastings, retail analyst at Bernard Sands, said many consumers are “increasingly carving up their spending budgets in favor of durable, lifestyle-enriching purchases and away from impulse and discretionary spending. For this reason among others, spending at general merchandise stores such as Wal-Mart will continue to be under slight pressure.”
With the Saturday before Christmas usually the biggest or second biggest volume day of the year — last year Black Friday was bigger — retailers this week will accelerate the markdowns and storewide sales beyond what’s already been widely seen this month.
“It’s hard to judge the season at the moment,’’ said a department store chairman, who spoke on condition of anonymity, noting there are 29 days between Thanksgiving and Christmas compared with 27 last year. “I think the customer is very versed on the fact that they have two extra days to shop this year, and it has not been consistently cold in the Northeast.
“Business is tougher than people thought. There is far more concern about what’s going on in the world, about personal debt, government debt. I think it will be tough.’’
The National Retail Federation had predicted a 4.5 percent total store sales increase for the holiday season, compared with 5.1 percent in 2003.
Neiman Marcus executives say they aren’t sweating. Karen Katz, president and ceo, said the company is selling plenty of resort designer clothing from Chanel, Akris, Prada, Etro, Chanel and others as well as holiday items, such as fur accessories, Ugg boots and bags, and diamond-studded designer and precious jewelry.
“We feel pretty good about the season,’’ Katz said. “We had our InCircle [frequent buyer] parties at 34 stores last week, and they were very nice so that is a reflection of what is going on. That kicks off the season for us.’’
She said the stores have sold 6,000 pairs of Seven jeans with a crystal-studded pocket for $198 and a few $5,000 mink-trimmed Baccarat bottles of J1adore fragrance.
“We keep thinking denim is going to slow down, but we are up 50 percent this year over last year’s denim business, which we just can’t even believe,’’ she said.
Some stores were bold last weekend. Kmart ran a 50 percent off storewide sale, and near the Bridgehampton store on Long Island, workers held signs along Montauk Highway promoting the sale. The sale will be repeated next weekend.
Bloomingdale’s staged its biggest sweater sale of the season, but chairman and ceo Michael Gould said the store is less promotional than a year ago, and the average price of what’s sold is up double digits from 2003. He said the sweater sale was preplanned.
“The upscale business continues to outperform,” Gould said, led by bridge, designer and contemporary sportswear, shoes, handbags, designer men’s sportswear and clothing, tabletop and fine jewelry. Cold weather businesses in men’s and women’s and furs are soft.
“The city [New York] is packed with tourists and it certainly feels that there are many more than a year ago,” Gould said. “If they are international tourists [exchanging euros for dollars] they’re starting at 40 percent off.”
But there is uncertainty in the marketplace and the next 10 days will be the linchpin to the season.
Louis Fortunoff, executive vice president of Fortunoff’s, the jewelry and home furnishings chain, said: “Everybody is in this quandary where nobody really knows what’s going on. The economy seems to be better, and it seemed initially that retailers wouldn’t have to promote. Lo and behold, everybody is promoting,” though he said Fortunoff’s is “not markdown-intensive.”
“There is still a lot of time,” to pull out the season, Fortunoff said. “I was in the Woodbridge, Willowbrook and Roosevelt Field malls and it seemed like people were starting to get serious about holiday shopping for the first time. I can’t think of a reason why it shouldn’t be better than last year. There’s relative stability internationally, the election is behind us and the market is up 8 percent so [the season] should end pretty good.”
But he warned, “If you don’t do it on Saturday, you’re dead. It’s a huge volume weekend.”
Nat L. Hyman, ceo of Landau, the 82-unit fashion jewelry and accessories chain based in Allentown, Pa., said, “Saturday should be our biggest day. For the most part, it’s been a lackluster Christmas. [Retailers] are so cash-flow hungry at this point. They need to reduce inventories. It’s been inconsistent for us. There are stellar days and some tough days, but all in all, we’re up about 5 percent on a comp-store basis.”
He characterized discounting in malls as heavy as he’s seen in years. “Between the 30 percent off the sale price and coupons for another 15 percent off, it’s hard to compute what the price is.”
Hyman said his chain doesn’t discount until after Christmas, which hurts sales, but he added that it helps profit margins in the long run. Landau is doing best with big $200 to $350 brooches, classic diamond stud looks, heavily beaded necklaces and sterling silver.
Winter will set in to help retailers, according to weather risk management firm Planalytics. “A major change will begin to occur across the country,” Paul Walsh, senior business meteorologist, said in a statement, “favoring a very cold/wintry pattern across a large portion of the Central and Eastern U.S., while locations west of the Rockies trend toward seasonably warm and more tranquil weather conditions. Compared with the relatively mild conditions over the last couple of weeks, this transition will contribute to an increasingly positive holiday sales environment affecting the major population centers in the eastern U.S. and Canada.” There could be an East Coast winter storm entering Christmas week, he noted.
Manhattan’s Fifth Avenue shopping district was bustling Saturday and by 2 p.m., crowds were so thick people walked in the street instead of on the sidewalk to avoid gridlock. At Saks Fifth Avenue, cosmetics, holiday gifts on eight and the designer shoe salon were packed, with huge clearances at 40 percent off drawing traffic. At electronics retailer B&H on the West Side, a crowd waited to get in before the store opened Sunday at 10 a.m.
“With only 11 days left until Christmas, consumers clearly have the upper hand on [speciality stores],” wrote Thomas Filandro, an analyst at Susquehanna Financial Group, in a Monday research report. Filandro said although the uptick seen in the past weekend’s mall traffic was positive, he does not think it was “strong enough to save the season.”
“Given the combination of a cautious and price-sensitive consumer, mild temperatures across most of the country and the disposable income pull from must-have electronic items such as the iPod and portable DVD players, mall-based specialists are being forced to increase promotional activity to ignite sales and right-size inventory,” Filandro said.
Merrill Lynch analyst Mark Friedman, who also follows specialty retailers, forecast increased promotions. “We are now seeing hard markdowns of more than 50 percent in addition to the planned promotions,” he wrote in a Monday research report. “Crunch time is here and we now expect [promotions] will get more aggressive each couple of days from this point on. We continue to forecast a good, not great fourth quarter, and expect the stocks to be volatile as we believe earnings estimates are still at risk for many companies.”
Sales at General Growth Properties’ 217 malls were up 1 to 2 percent for the Friday to Sunday period, with electronic gift cards, DVD players, plasma screen TVs and luxury brands, including Chanel, Burberry and Coach, especially in small, opening-price gifts such as key chains or scarves, performing, while apparel and outerwear were essentially flat. “For the past five years, Christmas business has been late, so we expect next weekend to be strong,” said Wally Brewster, senior vice president, marketing.
At Proffitt’s/McRae’s, business continued to build over the weekend, as the weather turned cool in Southeastern markets. “Consumers are starting to realize that Christmas is two weeks away. They’re very savvy. They want value and they want to get in and out,” said ceo Toni Browning. “We’ve added things to make the shopping experience easier,” including more prewrapped gift boxes and gift-wrapped electronic gift cards.
Apparel sales were up last weekend compared with the week before and the same period last year. Luxury, classics, novelty and newness drove sales. Sweaters, especially cashmere, velvet and fur-trimmed styles sold well. Jones Sport, Nine West and Karen Kane were strong vendors, along with private brands. Active loungewear, especially in velour, from Jones New York and Evan Picone, sold well, as did silk scarves, wraps, ponchos, gloves, hats and slippers, while casual legwear was slow.
December sales at Daisy Too, a boutique in Bethesda, Md., are off 8 percent, but co-owner Fabiana Mesquina said the holiday season is still young. The store’s annual 20 percent off sale is Thursday, 4,500 customers are invited, and the event typically generates about 15 percent of the month’s sales.
At Westfield Shopping Town Annapolis, a mall in Maryland, “We had an incredible Black Friday, then things slowed down a bit,” said Scott de Graffenreid, marketing director.
In Dallas, Macy’s at the Galleria staged a one-day sale Friday touting an extra 40 percent off a variety of previously reduced sportswear until 1 p.m. Foley’s ran 13 ads in Friday’s Dallas Morning News touting “Our Lowest Prices of the Year.” The chain offered coupons for extra discounts plus a $10 credit valid Friday from 8 p.m. until midnight. Among the deals were a Canon 4 megapixel camera for $250 from $400, while early-bird specials from 6 a.m. to noon pushed $16 diamond-accent bracelets and women’s leather jackets slashed to $120 from $268. On Sunday, Foley’s ran six newspaper ads extending the sale through Monday, with extra hours until 10 p.m. Sunday and 11 p.m. Monday.
In a slick 12-page color newspaper circular, J.C. Penney promised its “Biggest of the Year” one-day sale Saturday starting at 7 a.m. Doorbusters ending at noon offered a Worthington leather jacket for $60, from $200, while weekend discounts included 50 percent off all women’s fall, holiday and junior sweaters. Coupons promised $10 off a $50 purchase and $15 off a $75 purchase.
Kimberly Greenberger, specialty retail analyst at Citigroup Smith Barney, wrote in a research note Monday that some retailers such as Ann Taylor, Express, Limited Stores and Old Navy, seemed to have stepped up their promotions, with deeper incremental markdowns and new weekly promotions. “Gift items at these retailers appear to be sluggish, with many retailers stepping up promotions in leather accessories and gift sets.”
After touring the Mall of America on Friday with clients, Dana Telsey, retail analyst at Bear Stearns, wrote: “Traffic levels were comparatively high relative to the malls we have visited thus far on our 10-city holiday shopping tour. In accordance with the mall’s strong draw of tourists from far and near, we noticed a strong Asian contingent purchasing up a storm — the weakened value of the U.S. dollar makes this an attractive proposition for foreign visitors. While traffic and transaction activity appeared favorable to our eyes, several store managers confirmed that traffic has been tracking down about 5 percent at the Mall of America for holiday 2004, making for a more competitive and promotional environment. However, as Christmas is now only two weeks away, we anticipate a surge in demand.”
On Beverly Hills’ Rodeo Drive, the counters at Tiffany & Co. were three-deep with customers buying small gift-y items — from silver Paloma Picasso ornaments to Tiffany’s signature horseshoe-shaped key chains.
At South Coast Plaza mall in Costa Mesa, Calif., traffic this weekend was up 5 percent from the previous weekend, and spokeswoman Debra Gunn Downing said retailers were reporting that shoppers were in a buying mode — and not just for themselves. Stores such as Giorgio Armani launched aggressive sales with discounts of 40 to 50 percent.
Ken Goldstein, an economist with the Conference Board, expects consumers to spend 4 to 4.5 percent more than last year, though “there is this sense that after this holiday season we could be in for a real problematic winter in terms of retailing.”
— With contributions from Georgia Lee, Atlanta; Meredith Derby and Vicki M. Young, New York; Holly Haber, Dallas; Joanna Ramey, Washington, and Michelle Tyree, Los Angeles