Holiday comparable-store sales weren't quite as bad as expected, but unfortunately they confirmed one thing: Retailers are going to face a really bumpy road this year.
Looking at comp-store sales for November and December, the overall holiday selling period wasn't as downbeat as many retailers had feared. But both retail executives and analysts are growing increasingly nervous over 2008 with warnings of a recession — or "recession-like" conditions — as consumer spending slows to a crawl.
"Two-thousand and eight is going to be tough. Subpar growth for retail sales will persist until the labor market firms. As long as the labor market slackens and payrolls barely grow, retail sales growth will show its worst performance in years," said John Lonski, chief economist at Moody's Investors Service.
Consumer spending this year is expected to increase by less than 2 percent, which would be the worst calendar-year performance since 1991, Lonski said. Unless something favorable develops, there are not many reasons to be positive about consumer spending right now, he added.
After at least 18 months of robust same-store sales, some of the shine seems to be dimming in the department store sector as shoppers — saddled with higher living costs — head downstream to find bargains in a handful of specialty, off-price and mass merchants.
Meanwhile, of the retailers tracked by WWD, December same-store sales revealed what some analysts had warned: a sharp slowdown in consumer spending.
December comps declined 5.4 percent in the department store sector, while total sales for the channel dropped 5.3 percent. Mass retailers, on average, gained 1.1 percent, with total sales gaining 5.4 percent. Specialty retailers, on average, fell 3 percent, but showed a total sales gain of 5.4 percent, too.
Results came in pretty much as expected, which fueled a slight sell-off of shares on Wall Street in trading Thursday morning. But key words from the Federal Reserve Bank and a possible acquisition of beleaguered mortgage firm Countrywide Financial Corp. rallied the market in the afternoon trading session (see sidebar).
From the perspective of the consumer, who is contending with 30 percent credit card interest rates and $3 ATM fees, a spike in unemployment is causing some jitters. According to the U.S. Department of Labor, unemployment levels last month rose to 5 percent. That could continue to affect consumer spending moving forward, said Lonski.
Regarding December comps, results showed a clear pulling back from department stores. And, overall, the tallies were weak. Of the 41 retailers on WWD's radar, 27 posted same-store sales declines, while 14 were up.
Still, the picture brightens a little when looking at the November-December period combined. A calendar shift that has dogged comp results all year shifted almost a full week of holiday shopping into November from December. Financial experts said this could have impacted December results across all channels.
On a two-month basis, net sales in the department store sector remained practically flat, increasing 0.7 percent. Net sales in the specialty sector grew 9.7 percent during the two-month period, while mass merchants increased 6.7 percent during the same eight weeks. An analysis of the published same-store sales for the two-month period show an average gain of 2.5 percent in the mass channel, a 1.3 percent increase in the department store sector and a 1.6 percent decline in the specialty channel.
Unfortunately, Wall Street likely will ignore the two-month net sales and comp averages and focus solely on the poor December results.
From a higher altitude, December results affirmed expectations. "The retail numbers leave little doubt that shoppers are in belt-tightening mode. No part of retail spending is immune right now. From stores to online retailers and lower-income to higher-income shoppers, there are signs of weakness that will persist into 2008," said Frank Badillo, senior economist and director of the Retail Forward KnowledgeBase.
In the department store space, higher-end retailers such as Bloomingdale's and Saks Inc. benefited from tourism dollars in areas where they operate, said Dana Telsey, chief research officer of Telsey Advisory Group. Within the channel, Telsey said designer clothes at Nordstrom appeared to be weaker than at Saks. Nordstrom Inc. reported a decline in same-store sales of 4 percent, slightly lower than consensus estimates.
Saks faced difficult comparisons to last year as well as the last few months. The company reported a 0.8 percent gain in December, which beat consensus expectations of a 1.5 percent decline. In November, Saks reported a 25.7 percent comp increase.
Macy's Inc. declined 7.9 percent in December. The company released the average same-store sales for November and December at the same time, noting that it is a better indication of the holiday period because of the calendar shift this year. For the two-month period, the retailer said comps were down 1.1 percent.
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye