By and  on December 26, 2000

NEW YORK -- In a wild finale to their holiday season, retailers were saved last week by hordes of late shoppers, the cold weather raising demand for coats, cashmere and accessories, intensified markdowns, and extended store hours.

They managed to pull out slight gains, though they were at least a couple of points behind last year's millennium-charged increases. For Christmas 1999, the nation's merchants posted an average 6.7 percent gain. For Christmas 2000, chains are seen posting maybe half that, when they report December sales early next month.

According to sources, discounters, notably Kohl's and TJX Cos., along with some specialty chains, such as American Eagle and Talbots, fared best. Shoppers were out in these stores well into Sunday afternoon. Department stores such as Federated Department Stores and Dillard's performed close to very modest goals, slipping into the plus columns with gains of around one or two percent due to surges in the second half of the month. J.C. Penney is said to be meeting even more modest plans, in the negative figures, while Kmart and Wal-Mart resorted to desperate measures, including keeping stores open round the clock, to catch missed business.

Luxury stores reportedly got whacked. They planned big after running strong earlier in the year, and fell short. Neiman Marcus and Saks Fifth Avenue were said to have faced uneven levels of business depending on the weather and the region, with the Midwest, Atlanta and Texas markets said to be on the weaker side. Clearing excess inventory could come at an enormous cost to stores and vendors.

Generally, however, retailers catering to more moderate income levels were lifted by the two extra shopping days falling on a weekend, as well as the frigid weather spurring cold weather categories, and jewelry coming to life later in the game. Also, clearer skies Friday and Saturday made transportation to shopping centers easy. "The last two days were really crazy," said Walter Loeb, retail consultant.

"At many places, the register lines were six or seven people long," Loeb observed. "Kohl's started its post-Christmas sale the day before Christmas and was very, very busy. [At many retailers] a lot of people bought gift certificates at the last minute. This week will also be very busy. There are no hard numbers available, but the last two days brought retailing up to acceptable levels. Probably, the overall increase for the season will be around 4.5 percent to 5 percent. There was such late shopping. It was like people were shopping out of a sense of guilt," that their Christmas trees wouldn't be adorned by enough gifts."Profits is a different story," Loeb added. "Retailers took tremendous markdowns in order to move the merchandise. They are successful at being clean and mean for the new season to buy new merchandise, but at same time lowered their profits. They probably got their selling costs in line but gross margins were much lower. It's hard to say by how much at this point. We'll have to wait to get the post-Christmas figures."

"The malls were absolutely packed," agreed Eliot Laurence, senior vice president, Jeffries & Co. "Friday and Saturday were absolutely robust."

For the season overall, though, Laurence was somewhat more cautious in his outlook for comparable-store gains. "The numbers are not fabulous, but 3 percent is not so awful provided retailers planned right. With that, they could exit the season relatively clean and be ready for spring." A minus 1 percent performance, on the other hand, would have meant "a bloodbath" with unloading excess merchandise, he suggested.

In comparison to the malls, it was not as busy along Manhattan's exclusive shopping venues, hurting some upper-end, designer-oriented stores. While 34th Street seemed packed, there was not nearly as much body bumping uptown and along Fifth Avenue.

What pulled most of the retail industry down for much of the holiday season, particularly the higher-priced specialties, were largely those same factors that distracted consumers for much of the year: the slowing economy, the contested presidential election, high energy costs, dot-com fallout and stock markets sinking.

On balance, even with the late rally, retailers on Christmas Day sounded somewhat let down by the last five weeks, if not somewhat relieved that the holiday is history, and that they'll probably meet or come close to their sales targets for fourth quarter.

"Intellectually, the business was as we expected. Emotionally, it was not what we hoped for," said Macy's East chairman and chief executive officer Hal Kahn. "There were really no major surprises. The only one was that Sunday was not as big as we thought. Wednesday, Thursday, Friday and Saturday were very strong.

"I would say women's apparel was by far our best business, fueled by cold weather merchandise, sweaters, jackets, coats and gloves. Men's and home were the most disappointing, and jewelry was a struggle until the last minute."Michael Gould, chairman and ceo of Bloomingdale's, characterized his business as "a very mixed bag" through the season. He did cite some upbeat areas. "There was a strong, single-digit increase in cosmetics, which is a good barometer of traffic. Fur had almost a 50 percent increase, we had a double-digit increase in fine jewelry, and sweaters were outstanding." Contemporary sportswear, Palm Pilots and Razor scooters also did well, he said.

At this point, executives are reluctant to make a call on fourth-quarter profits, which are certain to be squeezed by the massive markdowns that permeated the season. This week marks another crucial stretch, with retailers expecting five or six more big volume days until New Year's Eve. Many hope to convert potential returns into exchanges, and through post-Christmas markdowns, clear out tons of winter goods to make room for early spring. Several advertised post-Christmas sales even before the holiday.

At Bergdorf Goodman, the first week of the season was difficult, but business improved in the second and was "strong" in the third. Then last week, "it was beyond expectations," said Ron Frasch, chairman and ceo. "Accessories, handbags and jewelry opened up late, but came on strong. Men's sportswear was a mob scene. In the last 10 days, we got a lot of new receipts for early spring."

Unlike the industry trend, traffic last weekend at Bergdorf's was just "okay," said Frasch. "That's the way we planned it. We felt most of our customers would be away on vacation, but we made our plan for Saturday and Sunday. It wasn't a home run, but Monday to Friday was really incredible. The turn for us was December 14, when we had a cosmetic event, with gift certificates with a purchase. We kept gaining momentum."

Frasch was among several retailers observing that the usual crowds that cram Fifth and Madison Avenues this year, and would have helped the high-end stores, never really materialized. "I didn't find the city as hectic as it's been in prior years," said Frasch. "The last three or four years it's been insanity. I didn't sense that at all this year."

What did help Bergdorf's in the second half of December was a greater focus on new receipts, and enhanced service. "We had concierges on every floor. We instructed our people to guide visitors to their destinations, and we kept all our merchants on the selling floors," Frasch said. He added: "We took our normal markdowns and tried to be more current on the merchandise."This week's markdowns will be "fast, deep and aggressive to get ready for new receipts," with Bergdorf's offering 30 percent off existing markdowns, Frasch said. In some cases, that could mean discounts of around 70 percent.

Bergdorf's sister division Neiman Marcus reported that last-minute holiday traffic through Saturday night was ahead of a year ago, but the luxury chain declined to be more precise. "More consumers are waiting until the last minute to finish their Christmas shopping," said Malcolm Reuben, senior vice president and director of stores.

"Resort ready-to-wear and accessories continued to drive the business last week, as they have all season. Consumers are looking ahead and want something new for resort and early spring," Reuben said.

Other bestsellers at Neiman's were handbags from Prada and Chanel, cosmetic gift sets, cashmere, leather and anything with fur, from a full-length coat to fur-trimmed gloves.

Saks Fifth Avenue also declined to comment on the state of its business. Its e-commerce site,, sent out an e-mail Monday advertising price cuts of 50 to 65 percent off selected items through Jan. 3. For example, one Calvin Klein skirt, originally priced $670, was slashed to $281.33. A Dolce & Gabbana skirt was listed at $392.63, from $935.

Saks did cite some items that were selling well. Among the bright spots: cashmere and cold weather accessories, especially matching sets in argyle, stripes and polkadots. The store also cited luggage from Louis Vuitton, Kate Spade and J.P. Tod's; Burberry apparel; resort wear, especially Lilly Pulitzer; New York Dog accessories; private label small leather accessories including coin purses, photo albums and wallets; Frederic Fekkai cosmetics, hair care and hair accessories and handbags, and spa items, including products from Bliss.

At, bestsellers included designer shoes, tall boots from Calvin Klein, Walter Steiger and Jimmy Choo, Earl jeans, intimate apparel, Kate Spade handbags and Burberry scarves, hats and coats. Also, Judith Leiber handbags, Zegna clothing, Donna Karan cashmere sweaters and various Dolce & Gabbana items checked well.

Jewelry has been suffering recently, but at Ylang-Ylang, a high-end, two-unit jewelry retailer in Dallas, holiday sales were up by double digits, and were the strongest in the chain's 15 years of business, according to Joanne Teichman, who co-owns Ylang-Ylang with her husband Charles Teichman.Bestsellers were Cathy Waterman's platinum rings and engravable keepsake charms, Devon Page McCleary's diamond crosses, private label diamond hoops and several different styles from Me + Ro.

More typical of how the nation fared was Macy's. "Considering the economy, we did okay, not great," said Kahn. "We didn't expect to. Our stocks are in line. There are no major surprises. If history repeats itself, this week will be very strong and a lot of people are giving gift cards as money. A lot of people will be shopping."

At Macy's and other stores, increases are expected for the post-Christmas period, but not of the magnitude seen in the past couple of years. All of the pre-Christmas price promoting is likely to have an impact.

Going forward into next spring, Kahn was hopeful. "Looking at 2001, we're up against good numbers in the first quarter. It could be challenging." But May 1, Macy's and many other stores will be against easier comparisons, Kahn explained, sounding a rare optimistic note.

"This year, all channels of distribution saw a slowdown in Christmas gift-giving," said another top retailer. "I would imagine there would be no bellringers."

However, Laurence of Jeffries & Co., who focuses on specialty chains, said "The retailers that benefited were those that did best executing in outerwear, juniors, sweaters and denim. American Eagle did particularly well. With the kids out of school this week, this could be a great week for businesses oriented to younger crowds."

Laurence predicted that despite all the concerns, when the final sale figures are in, they won't be all that bad. "My guess is that the business did show up pretty strongly in the last couple of days." Nevertheless, not enough to overcome margin issues, primarily seen at the companies that had some trouble heading into December, Laurence said. In the malls, the children's segment didn't look quite as robust, and at businesses catering to 8-to-13-year-olds, known as the tween market, markdowns were larger and there might be some negative surprises.

On the other hand, misses operations such as Ann Taylor and Talbots will be fine, Laurence suggested, while Abercrombie & Fitch would continue its off performance, in line with its recent trend. A year ago, A&F was so highly productive, that it became tough to match, he said. This year, A&F has "product issues," Laurence said."The parachute pant was a gigantic seller last year. It's hard to replace."

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