Though holiday sales results are ultimately unpredictable and determined by the inevitable last-minute rush to malls, retailers are surprisingly upbeat about the outlook, predicting significant sales gains.
"Everything seems to be very well aligned," said Jane Elfers, chief executive officer of Lord & Taylor. "We are in an apparel cycle right now."
There are plenty of indications they have the wind at their backs: Sales have been strong so far this fall, despite mild temperatures in the Northeast; the stock market is holding up; Wall Street bonuses should be big, and gas prices have declined. These positives should offset continued concerns over softness in the housing market.
Since September, the National Retail Federation has been forecasting a 5 percent gain in total holiday sales to $457.4 billion. According to a survey commissioned by International Council of Shopping Centers Inc. and UBS Securities, 17 percent of consumers said they expected to spend more this holiday season than last year, and 56 percent said they expect to spend the same. Shoppers said they expected to spend $676 on average during their holiday shopping, up from $620 last year.
And, more than ever this year, retailers are moving to direct shoppers to what the stores see as a few key items for gifts. Retail executives are banking on:
All manner of sweaters, from long tunics to paper-thin cashmere;
Denim, including straight- and skinny-leg styles from J Brand and AG;
Leggings to go over the jeans;
Jewelry, from charms to watches to high-ticket necklaces;
Gift cards, which are likely to be bigger than ever.
But the hottest items around probably won't be apparel. Observers predict that holiday 2006 will once again be all about electronics, from the impossible-to-find PlayStation 3 by Sony to an Apple iPod to Microsoft's new MP3 player, the Zune. Demand for these items could eat into spending on apparel.
Still, L&T anticipates selling 160,000 cashmere sweaters in December, priced $89 and $180, and sees a big season ahead for diamonds, belted wool coats, denim jeans and cold-weather accessories."I can't wait to see what happens in the fourth quarter," Terry Lundgren, chairman, ceo and president of Federated Department Stores, recently said, noting the company was pleased with its comp-store performance in September and October.
"We are optimistic," Steve Sadove, ceo of Saks Inc., chimed in earlier this month. He thinks his buyers have a handle on what consumers want and said the relaunch of petites and private label this fall should help the holiday season. Saks Fifth Avenue is looking to Toy Watches, $150; Portolano gloves and scarves from $98 to $135; Alex & Ani necklaces, $175, and bracelets, $115, in precious metals in 18-karat gold vermeil; Marc Jacobs wristlettes, $475; Juicy Couture velour hoodies, $148, and drawstring pants, $128, as well as Fabergé decanters and shot glasses, to be among the bestsellers.
GETTING THE PRODUCT RIGHT Other retailers also believe their assortments are in sync with what consumers want.
"Our results have been going really well this year, and we don't see anything that would lead us to think that will change," said a Nordstrom spokeswoman.
Luxury watches from Michelle and Burberry; handbags such as Yves Saint Laurent's Muse, and in footwear, ballerina shoes, kitten heels, peep-toe dress shoes and animal prints are standouts so far. Nordstrom, which recently expanded its designer collections online, started offering free shipping for orders of $100 or more for the holiday.
"We've had a great fall season," said Michael Celestino, executive vice president of stores for Barneys New York. "From what I can see, we're going to have a very good holiday season."
The Co-op business continues to be strong, dresses and sweaters are key classifications and handbags and jewelry are doing well. Celestino said he expects the last two categories to accelerate as the season progresses. "The consumer's mind-set is good," he said. "I don't anticipate our business being any more promotional than it normally is. Our business is continuing to grow."
With Hannukah falling very late last year, many retailers saw sales intensify as Christmas approached. This year, Celestino noted, Hannukah falls in the middle of December. "The business this year will be more spread throughout the season," he said.Macy's East is looking to chunky, long-length sweater jackets, cashmere sweaters, cocktail rings, iPods sold via the Zoom vending machines recently installed in most stores, active velour separates, puffers in longer lengths, wristlets from such brands as Coach, Kors, Dooney & Bourke and Calvin Klein, as well as Lionel trains sold just at the Herald Square store and Steiff teddy bears to be big sellers.
Ann Taylor is emphasizing gift items such as jewelry boxes from $20 to $30; cashmere sweaters, priced $128 to $198, and cashmere accessories including scarves, gloves and hats, priced from $42 to $118. At Ann Taylor Loft, the gift assortment includes nylon travel bags, priced from $19 to $79, and the Real Simple Book Collection at $20. "We're hopeful. Our guidance is above last year for the fourth quarter and 2006," said Kay Krill, president and ceo of Ann Taylor Stores Corp.
"It's been a good season," said Ed Bucciarelli, president and ceo of Henri Bendel. "We've done our homework. We've done some testing throughout the season to know what the customer is looking for." He said Bendel's is poised to capitalize on the popularity of knitwear with the store's private label and new contemporary subbrand, Henri, where trends such as tunics and rugby stripes are addressed.
"Our accessories business is on fire," he said. "We're selling tons of clutches. Our beauty continues to grow tremendously. We are the MAC headquarters and have two new brands, Model Co. from Australia and Mally Beauty."
Charms and found objects are driving the jewelry business, Bucciarelli said. "In denim, we think we're the headquarters for J Brand skinny-leg jeans. We also have Josh Goot apparel from Australia, and we're having a big love affair with adampluseve. These resources are becoming core for us."
Bendel's introduced holiday merchandise earlier this year than in the past. The retailer has two catalogues planned for the season, Wonderland and Chic Treats. This is the first time Bendel's has produced a catalogue in 20 years, Bucciarelli said. "We're seeing the holiday shopping already begin, but it will crescendo at the last minute," he said. "I believe we've seen it start earlier. The consumer is pretty upbeat. It's the beginning of the season, and she's responding to everything we're doing.""Every indication we have for the season is positive," said Stacey Pecor, founder of Olive & Bette, New York specialty store. Categories such as dresses have been strong, and the retailer's top dress vendor is Susana Monaco. Straight-leg velvet jeans from AG and leggings are top sellers.
"They have to have leggings," she said. "We can't keep them in stock."
Sweaters are also a hot category, with oversize styles, wrap sweaters and tunics selling well. Those trends are driving the belt and flat-shoe business, she said. "Our average price point has gone up pretty significantly, from $107 last year to $122," she said.
"We've had an unbelievable season," said Stefani Greenfield, co-founder of Scoop. "It's a dress-driven season." Scoop's top-selling dresses are Diane von Furstenberg, Thread, Alice & Olivia, Le Shak by Tracey Feith, Miu Miu, Tibi, Azzedine Alaïa, Thakoon, Leila Rose, 3.1 Phillip Lim and Missoni. "We're running a 22 percent increase for the season," Greenfield said. Handbags and belts have been selling well, especially clutches from Tory Burch and cinch belts from Motif 56, Michael Kors and Lucy Sykes.
THE MASS CHALLENGE But the outlook isn't all positive.
"The prospects for Christmas are more than moderately good, but it's kind of bifurcated," said Arnold Aronson, managing director of retail strategy for Kurt Salmon Associates. "There will be great price competitiveness at the mass end of the business, with down-to-the-minute nail-biting and Target maintaining its performance differential versus Wal-Mart. However, luxury and affordable luxury stores will have very positive results, and this will be a breakout year for department stores including Macy's, Bloomingdale's, Nordstrom, Belk and Penney's."
Planalytics, a weather forecasting service that is geared to help retailers plan their season, believes consumers will spend far less on seasonal apparel and other need items as a result of the much warmer weather this year, 20 to 30 degrees warmer in some areas. That favors nonseasonal gift purchases and mass merchants could spur higher demand for outdoor lighting and outdoor recreational activities, Planalytics said.
IN THE CARDS According to an NRF gift-card survey, conducted by BIGresearch, gift-card sales will total $24.81 billion this holiday season, a $6 billion increase over last year's $18.48 billion. Consumers will spend $116.51 on average for gift cards versus $88.03 in 2005."The popularity of gift cards has increased at a remarkable rate," Tracy Mullin, NRF president and ceo, said in a statement. "Consumers love gift cards because they take the guessing out of holiday shopping and retailers love them because they are easy to stock and take up minimum shelf space."
Because retailers record sales from gift cards after the card is exchanged for merchandise, much of the $24.81 billion won't be reflected in holiday sales and will instead be included later, primarily January and February, when the cards get redeemed, NRF said. The survey polled 8,090 consumers from Nov. 1 to Nov. 8, and has a margin of error of plus or minus 1.0 percent.
ONLINE OPPORTUNITIES E-commerce also is expected to boom this holiday after truly coming into its own during the holiday 2005 period. "Online retailers are really going to do well," said Michelle Madhok, founder of SheFinds.com, who has polled online retailers, including Sephora, Apple and Drugstore.com and others, on what they see as potential bestsellers. Madhok added, "Consumers are shifting to more online shopping due to the high price of gas [and] getting more comfortable with shopping online — there are great deals online and you can compare prices easier. Most sites are offering free shipping or a flat rate."
Consumers are expected to spend $11.9 billion online for the holidays, according to SheFinds. Among the potential sellouts cited by SheFinds are Playstation 3 and its competitor Nintendo Wii; Gap's Go (Red) items, including candles and cashmere hooded sweatshirts; iPod Nano; Tickle Me Elmo; J Brand skinny denim jeans; Chanel nail polish, specifically 219 Black Satin Le Vernis, and Microsoft's Zune 30GB digital media player.
"We're having a really strong start to holiday already," said Melissa Payner, ceo of Bluefly, the off-price Web site. "Last Monday, we had the most traffic we've ever had. We see our season building earlier this season."
On Wednesday, the site launches a 15-percent-off shoe promotion and then a different percent off each category on subsequent days. Based on a 35 percent increase for the third quarter, Payner said, "We see really big increases going into the holiday." She expects designer handbags between $500 to $2,000 (20 to 40 percent off regular prices) as well as cashmere crewneck sweaters, $85 (from $240 at regular retail), cashmere scarves priced at $50 from $120, daytime dresses in the $150 range and generally 40 percent off, to emerge as holiday bestsellers. — With contributions from Liza Casabona
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