By  on December 27, 2004

NEW YORK — Though it’s not yet New Year’s, many retailers are feeling hungover.

After a rough and tumble Christmas, stores are hoping the disappointing season can be salvaged over the next few weeks through gift-card redemptions and via steep markdowns, often up to 50 percent, and even higher on outerwear. January, when retailers run big clearances to shed winter clothes and transition into spring fashions, is becoming a bigger and bigger contributor to fourth-quarter sales and profits.
If retailers have learned anything from this holiday, it’s that consumers, saddled with historic credit-card debt and higher fuel costs, are getting choosier, and demanding greater values and products of color and distinction when it comes to apparel and accessories. Otherwise, consumers switch their dollars to iPods, digital cameras, Nintendo and PlayStation game systems.

“It was all about items, not assortments,” said Bob Goodfriend, chairman and chief executive office of Goody’s Family Clothing, the Alcoa,Tenn.-based apparel specialty chain. He acknowledged Goody’s may have missed some sales on the hottest items, including velour sets and sweaters and that next year, Goody’s will identify key items before the holidays and stock up for the season. The chain may also seek to bring in more spring goods earlier, since they’re selling well according to Goodfriend.

The concerns among store executives are compounded by the knowledge that as 2005 progresses, they run up against strong results from 2004. 

While the improving job market and increased Wall Street bonuses might help the situation, Christmas hardly delivered a hopeful message for the future. There was a pickup in business towards the end of last week, particularly Thursday, though no big rush materialized in the final days. Consumer confidence indicators slipped a bit and the snowstorm in the Midwest last week took a toll on certain locations, such as Chicago, Cincinnati and Columbus.

Still, after strong spring and fall sales trends, there’s no sense of panic that retail profits for the year will be bad, and there have been certain bright spots in the post-Thanksgiving weeks amid the general softening. Luxury retailers made or exceeded goals and, in places like New York, were buoyed by tourism and the resilient stock market. Also, Internet, electronics and gift-card sales accelerated beyond expectations; brooches, premium denims, contemporary sportswear, and ponchos sold well, as did early spring merchandise. Also, stores planned inventories conservatively, so there’s not insurmountable excess.This year, there were 29 days between Thanksgiving and Christmas, compared with 27 a year ago, but one department store chief executive said Sunday, “I don’t think the two extra days meant two extra days of business.”

As far as the season overall, “It didn’t have the same zip and zap at the end that it had during the whole beginning,” he said. “Even some luxury businesses didn’t have a good month. The cold-weather business was not good, fur picked up a tad, small cold-weather accessories, including gloves and scarves in men’s and women’s were very difficult. Handbags were having a hot season until December and men’s collections were soft. Spring will be more challenging than people have been thinking.”


For the holiday period, Target is anticipating a 3 to 5 percent comp-store gains, though Wal-Mart — the first to stir pessimism about the holiday season after its weak Thanksgiving weekend — dropped its projections to a 1 to 3 percent comp gain, after initially predicting a 2 to 4 percent boost. Last Thursday, Wal-Mart spokeswoman Sharon Weber characterized the retailer as “cautiously optimistic,” adding, “It’s tough to close our doors on a Saturday,” which this year was Christmas Day. “It is generally such a big shopping day for us.” Business was further dampened on Friday, Christmas Eve, when stores closed early, at 6 p.m. They reopened 6 a.m. Sunday, which many retailers expected to be a major shopping day.

Wal-Mart had its shelves ready. By late evening Dec. 23, the retailer stocked fresh spring handbags, including colorful mock-croc styles and charm-strewn barrel bags reminiscent of Juicy Couture. White Stag had a new grouping of Americana-themed red, white and blue sweaters. Signs touting a “New Year of Savings” appeared on everything from basic khaki pants to tax-organizer folders.

Summarizing the season, Weber listed cell phones, outdoor Christmas lights, digital cameras, portable DVD players, satellite radio and high definition TVs as standouts. “What’s interesting is everything seems to be selling a week later than in years past,” she said referring to purchasing patterns on holiday decor and gifts.A stronger performing and more promotional J.C. Penney Co. said traffic was robust through Christmas Eve, with shoppers motivated by markdowns and colder weather. Bestsellers included women’s, men’s and juniors’ apparel, especially outerwear, gloves, shoes and fine and fashion jewelry, according to spokesman Tim Lyons. “We’re standing by our forecast for low-single-digit gains for the November-December selling period. Right now we’re about where we expected to be. We’ve still got this coming week, including a doorbuster event that kicked off on Sunday morning at 7 p.m. with markdowns up to 70 percent off on some merchandise.”

Macy’s Herald Square Sunday afternoon was crowded with bargain hunters, though the aisles weren’t as clogged as they were in the week leading up to Christmas. Markdowns on jewelry, hosiery, handbags and women’s coats ranged from 25 percent off to as much as 65 percent, and in some cases shoppers received an extra 15 percent discount if they used their Macy’s card. The coat department was especially busy, with a line at one register 13 people deep around noon.

Hecht’s, the Washington, D.C.-based department store owned by May Co., opened its doors at 6 a.m. Sunday with deep post-Christmas sales, touting $29 women’s cashmere sweaters and 20 percent additional discounts with coupons.  On Friday at May’s Lord & Taylor unit in Chevy Chase, Md., there were racks of up-to-65-percent-off fall and winter women’s sportswear and separates, located amid full-priced spring fashions.


Compared to the mainstream, the luxury sector fared far better. Holt Renfrew president Caryn Lerner said the Canadian chain will produce a 10 to 12 percent gain for the season, that inventories are “very much in line” with about 30 to 35 percent of the selling floors currently displaying spring merchandise, and that the company was staging a big sales day on Sunday with 30 to 50 percent off on special items the company bought into, including private label cashmere sweaters, men’s socks and outerwear.

For spring, “We’re pretty optimistic and quietly confident,” she said. The company will emphasize four themes in women’s: a cross cultural “global exchange” of eclectic customized and handmade clothes; “whiteout” for shades of white on white; prairie girl looks with feminine, western slants, and “empire building” featuring bolero jackets, short cropped knits and empire dresses.’’“Our customer looks to us to have a point of view,” Lerner said.

Barneys New York also expects a double-digit gain for the holiday season, said chairman, ceo and president Howard Socol. He said last week was strong, with results exceeding plan, and that selling spring goods early, which Barneys has been doing since the end of November, has been “one of the real successes.” The plan for the next few weeks: “Just fight as hard as we can to get new spring goods as quickly as we can.” The strongest categories at Barneys have been handbags, jewelry, shoes [though not necessarily as gift items] denim and contemporary sportswear.

Nordstrom cited Marc Jacobs’ jewel-tone cardigans with jewel buttons, Juicy Couture track suits, handbags and wallets, and North Face Denali jackets in exclusive colors — lavender or pink — among the bestsellers.

“It’s definitely a luxury Christmas,” said Debra Gunn Downing, spokeswoman for South Coast Plaza megamall in Coast Mesa, Calif. “This Christmas is not only our best Christmas ever, but our best year ever.” Ugg boots and Ugg-style boots were the bestsellers at stores throughout the center. Louis Vuitton was packed Thursday, and Williams-Sonoma, had huge check-out lines. “I think the week after Christmas will be just as strong as Christmas week, particularly with sales at many of the stores” said Gunn Downing.

“There’s really been no price resistance,” said Rose Clark, vice president of merchandising at Stanley Korshak, Dallas

It’s a different story among the mass merchants, according to Marshal Cohen, president of NPD Fashionworld. He said they fared just OK overall. They would have done better, he argued, if shoppers had done more than just cherry-pick the best deals from the shelves.

“The consumer did not come in looking to shop for themselves at the same time they were busy hunting for bargains,” he said. “It was a very strategic holiday shopping. People came in with the circular in hand, they bought what they came for and then they moved on to the next deal. If it wasn’t an advertised special, it wasn’t found.” After Christmas, Cohen expects a looser spending ethos. Armed with gift cards, “They will be willing to pay full price for something new, something spring in feel,” he predicted.

“We’re going to see in the final analysis the industry will have performed where we expected” with a 4.5 percent year-over-year holiday sales increase, said Tracy Mullin, president and chief executive officer of the National Retail Federation. “It will be decent, but not spectacular.”

A more dramatic summation came from Arnold Aronson, managing director of retail strategies, Kurt Salmon Associates. “It’s been a nail-biter all the way up to the end,” he stated. “With the exception of luxury accessories, there hasn’t been a breakthrough silhouette or breakthrough fabrication, to stimulate apparel sales.”


Still, January brings some hope. “The combination of gift cards and a savvier customer who waits out the retailer for the lowest price of the season is turning January into a much bigger percentage of fourth-quarter business than ever before,” Aronson said. “Coming off a challenging Christmas season, retailers now have to face up against one of the strongest six month periods in the past several years.”

“I continue to believe gift cards are the main culprit for weak November and December sales and clearly we will begin to see these redeemed Dec. 26,” said Mark Montagna, senior analyst, Wells Fargo Securities. “Retailers are going to catch up to some degree, but some of those catchup sales are going to be at lower prices. What consumers purchase at 60 to 70 percent off now, before it was maybe 40 percent. However, retailers will get the benefit of full-price spring merchandise. There is a propensity to treat yourself when you have a gift card. And with these gift cards, you end up spending a little more rather than risk leaving any dollars left on the card. It seems like it’s a much more acceptable gift that people really enjoy. I don’t think it has the stigma that paper gift certificates had. The gift cards have kind of a cool look, and it’s easy to hold onto. You stick it into your wallet.”The Mall at Short Hills in New Jersey, a property of Taubman Centers, reported that gift certificates were up 5 percent last week and 10 percent for the season thus far, and that designer accessories and jewelry were selling the best. Taubman’s Westfarms center in Connecticut reported that no less than 40 people were in line to buy mall gift certificates on Sunday.

A spokesman at Chicago-based General Growth Properties, considered the nation’s second-largest shopping center developer, said gift cards sales rose at least 20 percent over last year, while sales overall should be up between 2 and 3 percent.

At the Mall of America, the nation’s largest enclosed shopping center with 520 stores, sales were reported brisk in the last days before Christmas and retailers were bracing for an onslaught of shoppers starting Sunday, with the mall opening at 8 a.m, three hours early for the day. “Our retailers are saying they are having the best year in a long time,” said Maureen Bausch, mall vice president for business development. Helping business have been European shopping travel packages featuring lower U.S. prices, thanks to the falling value of the dollar and strengthening Euro, Bausch said. She said one English tour is offering airfare and two nights in a Minneapolis hotel for $400.

— With contributions from Georgia Lee, Atlanta; Katherine Bowers, Boston; Joanna Ramey, Washington; Michelle Dalton Tyree, Los Angeles; Rusty Williamson, Dallas, and Cate T. Corcoran, New York

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