NEW YORK — Now all the hopes of retailers lie in the cards.
After what is being labeled the worst holiday shopping season in three decades, some retail analysts firmly believe that post-Christmas sales will be better than pre-Christmas ones. And the rush of consumers might just be enough to make up for the dismal numbers seen at retail throughout November and December.
According to a report by Todd Slater, equity analyst at Lazard Frères, sales "have been trending that way for years, a phenomenon we like to call the ‘January effect.’ Consumers have increasingly spent more of their time shopping the stores the week and month following Christmas, where one’s money can stretch 25 percent, 40 percent or even 50 percent further."
Slater pointed out that the January effect is magnified during weak economic periods, when consumers penny-pinch because it is a "necessity." The analyst added that post-Christmas sales this year could be additionally boosted by the "gift card effect," "driven by the redemption of ever-popular gift cards and gift certificates in lieu of sweaters and CD players." According to Slater, the purchase of gift cards was likely accelerated in the days preceding Christmas, as gift cards became the choice for those who procrastinated in making their purchases.
Slater wrote that retailers said "gift card sales were up by as much as 50 percent over 2001, a year that in itself set a record."
American Express estimates that the cash, check and gift certificate market is worth about $70 billion a year. A survey in November by America’s Research Group, cited in a Salomon Smith Barney report, indicated that 51 percent of those polled were likely to give gift certificates, gift cards or cash this year, up from 39 percent a year ago.
Data from the International Council of Shopping Centers indicates that the average amount in gift certificate and card sales per mall during the 2001 holiday season was $598,643, with the most frequently sold denomination for the certificate/card at $25 and the average amount of a purchase using a certificate/card at $59.
Retailers book revenue from gift cards when they are redeemed, which would help post-Christmas sales when recipients head to the stores to make their purchases. "[About] 10 percent of the gift cards are redeemed in the week following Christmas, with another 40 percent to 50 percent coming in the month of January," according to Slater.Linda Kristiansen, analyst at UBS Warburg, wrote in a research report on The May Department Stores Co. on Dec. 26 that 15 percent of the month’s sales were still forthcoming. "With pre-Christmas gift card business reportedly tracking at twice the rate of store sales, we suspect that modest upside to month-to-date sales results is most likely," she noted.
Deborah Weinswig, retail analyst at Salomon Smith Barney, wrote in a Dec. 16 research note that some department store retailers and discounters this year pushed the gift card as an option for holiday presents.
Lord & Taylor, part of The May Department Stores Co., marketed gift cards as the "new gift of choice," and offered a variety of holiday designs. Bloomingdale’s, part of Federated Department Stores, has been promoting gift cards with in-store signage sponsoring a "one gift fits all" focus.
At Kohl’s, Weinswig noted, family members were buying its gift cards for younger customers. She pointed out that if a customer returns merchandise from Kohl’s without a receipt, the consumer would receive a gift card instead of cash. At J.C. Penney Co., a gift card doesn’t have an expiration date, but the retailer assesses fees two years after a card has been left unused.
"We believe that gift card growth in 2002 has been particularly strong due to the shorter holiday selling season and the lack of a ‘must-have’ gift item," she wrote. The analyst noted that retailers were likely merchandising stores in anticipation of strong post-Christmas sales, which will partly be driven by gift card redemptions.
To be sure, the gift card focus isn’t necessarily an ideal way for retailers to get more foot traffic into the stores to clear out excess merchandise. Frères’ Slater noted that 15 percent of gift certificates are either lost or unused, representing lost dollars that most likely will never accrue to the retailer’s sales or bottom line.
Weinswig pointed out that most state laws require that unused dollars from a gift card, after a certain period of time, usually are sent to the state, as those dollars represent "unclaimed property." The states in turn hold the money on behalf of recipients, who can technically reclaim it from their respective state governments. Retailers, however, receive interest on the unredeemed portion of the gift cards.But, as reported, retailers are looking for any silver lining they can find — even if it’s the lingering hope of consumers redeeming gift cards over the coming months. However the cards fall, though, analysts are bracing themselves for a series of revised retail projections in the next few weeks, following Thursday’s revision downward by the world’s largest company, Wal-Mart. As Tracy Mullin, chief executive officer of the National Retail Federation, said Thursday: "Retailers will be counting on postholiday sales more than usual to pad their holiday numbers. As much as 10 percent of holiday sales can be recorded the week after Christmas."
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