Even as concerns remain over the consumer mood in 2011, retailers have entered the last leg of the holiday season — the week between Christmas and New Year’s — expecting another wave of spirited shopping and feeling good about the outcome so far.
And that’s particularly true in apparel and accessories. This past weekend, retailers and analysts concluded those categories performed the best during holiday 2010 after several years when the sector lagged in favor of electronics and toys. Skyrocketing online and mobile shopping, robust gift card sales, tax cut extensions, rebounds in luxury goods and men’s wear, and free shipping of online orders also spurred sales growth this year.
Pundits forecast the holiday season will see anywhere from 3 to 5 percent gains over last year, and believe “frugal fatigue’’ set the stage, whereby consumers became tired of holding back after two years of belt tightening and emerged eager to shop for themselves as much as for gifts. The volume improvements, along with the solid inventory and expense controls, and aggressive planned-in-advance promotions, have elevated expectations for healthy fourth-quarter margins and profits.
No doubt, Sunday’s storm blanketing the Northeast and mid-Atlantic regions and reaching 10 to 12 inches in some locations deterred traffic at many malls and put a dent in sales. Yet the blizzard didlittle to dampen the mood. The day after Christmas is traditionally one of the biggest volume days of the year, leading to a bustling retail week characterized by returns and exchanges, gift card redemptions and price cuts hitting new highs. Major sales at such stores as Saks Fifth Avenue, Bergdorf Goodman and Nordstrom kicked off Sunday.
“The day after Christmas is a very important day,” said Brendan Hoffman, president and chief executive officer of Lord & Taylor. “It looks like today [Sunday] is starting out strong. Maybe people were getting out early to beat the snow, but the storm will certainly affect the malls. You can’t control the weather, but we’ll get through it. Up until today, we were up double digits. I don’t know what the storm will do, but the customer has been continuing to respond. This season, gains were across the board. For Lord & Taylor, it’s been the best Christmas in a number of years — five years for sure.”
“It’s a top 10 day for us,” said Pete Nordstrom, president of merchandising, Nordstrom Inc., referring to Sunday, which marked the start of the chain’s half-yearly men’s wear sale. “Sales of gift cards were up this year so I think that bodes well for today going forward through January.”
“We continued to do better than our plans,” Nordstrom added. “We’ve been exceeding sales growth plans. Sales have been growing faster than inventory for several months. Inventories are really lean. Merchandise is flowing in well. Newness drives the business. We are having a really good regular-price season. Clearance is not dominating the business like a couple of years ago. Shoes, particularly women’s in all price points, were really strong. It’s been that way for over a year.” He cited Uggs and Toms as standouts. “Jewelry has been good across all price points,and the watch business has been really good.”
“In terms of store traffic, conversion rates, sales and, for most retailers, margin performance — this is what a good Christmas looks like,” said Craig R. Johnson, president, Customer Growth Partners. “It’s going to be the best year-over- year sales growth in at least five years —in the 6 percent range for the November-December period, excluding auto sales, restaurants and gas.”
Johnson estimated America’s retail sales totaled $521 billion, brick-and-mortar and e-commerce combined, far surpassing the $508 billion registered in 2007, the last year before the recession. Apparel-accessories, he said, would be up in excess of 7 percent, marking the strongest growth since 1999 when the category rose 7.3 percent. “The single biggest factor is there’s a lot of pent-up demand,” Johnson said. “People are out buying again.” He said men’s wear, accessories and toys have been strong, while electronics have been more mixed, with unit sales up but dollar sales down due to deflation on flat-screen TVs.
Though precise sales results won’t be available until next week when many major retailers report December comparable-store sales, it is believed that Macy’s, Toys ‘R’ Us, Home Depot, Lowe’s, Tractor Supply, Nordstrom, Target, Costco, Lululemon, Kohl’s, Tiffany, Ross Stores, Anthropologie and Zumiez, among others, had winning holiday performances. Abercrombie & Fitch is showing improvement with sharper prices and discounts domestically, while overseas stores remain less promotional.
On the other hand, Sears, Talbots, American Eagle, Zale and Wal-Mart seem to be falling short.
Neiman Marcus and Saks Fifth Avenue came through the season on an up note, with the luxury sector showing renewed life. At Neiman’s, “We saw customers back in the stores. They were shopping, clearly not at the rate of before the recession, but better than what we expected,” said Ginger Reeder, vice president of corporate communications, Neiman Marcus Group. “Women’s accessories, handbags, shoes and some jewelry stood out. Men’s did well and it’s been awhile since we’ve been able to say that. Customers are responding to new things. As resort and spring merchandise come in, they respond.”
“We feel pretty good about the season,” noted Ginny Hershey-Lambert, Bergdorf Goodman’s executive vice president and chief merchant. She said there’s been a good response to “positive, fun items” such as Paul Morelli meditation bells or those items that represent tradition and investment, such as Monica Rich Kosann heirloom lockets. She also cited products with fur and cold weather items, specifically coats from Moncler and Loro Piana. “I feel like the foreign traffic and tourism seem to be a little better than last year and that our core clients continue to be loyal,” Hershey-Lambert added.
Regarding traffic in the store on Sunday, Hershey-Lambert said despite the storm, “It seems to be OK. We started our after-Christmas sale. Women are happily buying shoes,” offered at 50 percent off, while ready-to-wear is running 60 percent.
“It’s everybody’s sentiment that luxury is back, and I think in a big way,” observed Henri Barguirdjian, ceo of Graff in America. “We certainly saw it at Graff with double-digit increases in sales. New York was phenomenal, almost 30 percent ahead. We had a lot of South American clients, particularly Brazilians, and we started to see a Mainland Chinese customer for the first time in a significant way.
“People are feeling more relaxed with the economy,” he continued. “Maybe we have turned the corner. Obviously, unemployment is a big factor. Still people are a bit more confident. We sold quite a few very important stones. Precious stones, like gold and art, are a nice refuge for a small percentage of your assets. Also, color is back. We sold a lot of colored stone jewelry, more so than in past four, five years. Clients are looking for original design and colored stones. I am very bullish for next year.”
“I think the season has been exceptional,” said Joel Bines, managing director, AlixPartners LLP. “It’s certainly been well planned by the retailers. My mall walks and store visits tell me that the promotion activity, while very loud, appears to be based on [advanced] plans. There’s real signage and merchandise stacked out for ‘bogos’ [buy-one, get one at a percent off]. I would call it ‘organized promotional chaos.’ It gives consumers impression of deep discounts but it’s already [baked] in the merchandise plan.
“Apparel is going to come out as the big winner,” Bines added. “We’re calling 2010 ‘The Year of the Sweater.’ People are buying apparel again for lots of different reasons. For starters, over the last two years, apparel retailers have done a much better job of getting the price-value equation right for the customers. They’ve become really expert in driving cost out of the manufacturing, over the last two years, as retailers looked inward on how to maintain margin in a declining sales environment. They also really benefited from enormous pent-up demand.”
Among the season’s best-selling products: handbags, shoes, luxury items, men’s wear, electronics — particularly iPads and smart phones — jeggings, jeans in new silhouettes and statement jewelry.
The big question is what happens right after the holiday. “[Next year] is going to be extremely challenging,” Bines said. “The raw material input prices on products are way up. The price of gold, the price of cotton and the costs surrounding logistics and transportation are all way up. That will put pressures on margins in 2011, forcing [retailers] to have higher prices or lower margins and I don’t think the consumer is ready for higher prices.”
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