The Home Stretch: Retailers on Edge Going Into Final Weekend

<BR><BR>As if it hasn't been tough enough all year, retailers are under intense pressure this weekend to make up lost ground. They're running behind in their Christmas targets and in most cases the planning was conservative. That means they're in the...

As if it hasn’t been tough enough all year, retailers are under intense pressure this weekend to make up lost ground. They’re running behind in their Christmas targets and in most cases the planning was conservative. That means they’re in the negatives, and reports are wide-ranging, from negative single digits all the way down to negative 12 or 14 percent.

The bright side: They’re expecting consumers to snap out of the deep lethargy that has loomed since Election Day, and hit the stores en masse. Starting today, with any luck, a late surge will sustain itself until New Year’s. It could put many retailers back in the plus column. However, according to a Chase H&Q research report issued Thursday, “In most cases we do not expect a last-minute surge to be enough to deliver on-plan results.”

“It’s going to be extremely violent,” predicted Walter Loeb, retail consultant. He thinks the mad crush at retail will start at noon today.

“Stores are down, but it is very hard to judge how far, because of the fact that during the next three days, traffic in the stores will be beyond anybody’s capacity to handle the business,” Loeb said. “Some customers are going to walk out and not buy.”

But the situation’s not entirely bleak, Loeb added. “I believe most retailers will achieve satisfactory sales results [for the overall season] by Sunday night, but they are giving away margin dollars to achieve it.

“By the end of it all, sales for department stores will be up by 2 or 3 percent, specialty stores will be up 3 to 4 percent, and discount stores, 5 percent.”

As Loeb and others in the industry noted, those sales gains will be attained through desperate measures. For example, Kmart Corp., the nation’s third largest retailer, started keeping almost all of its U.S. stores open around-the-clock beginning Thursday. For the first time ever, Kmarts will be open for 86 hours straight, from 6 a.m. Thursday until 8 p.m. Sunday.

“Our insights have told us that with the harried pace leading up to Christmas, coupled with the weather difficulties around the country, consumers just have not had the time to get done what they need to get done before the big day,” said Brent Willis, Kmart’s chief marketing officer.

A handful of stores will not stay open all night because of local ordinances, and the company’s 104 larger Super Kmart stores already stay open around the clock, Kmart said.

In addition, Kmart is offering discounts of up to 70 percent on more than 40,000 items.

Wal-Mart, the world’s largest retailer, is also extending store hours, though not quite so drastically. Of Wal-Mart’s 2,590 stores in the U.S., roughly half are supercenters and half are discount units. The supercenters already operate around the clock, but the 1,292 discount stores will extend hours on Sunday, opening at 6 a.m., a couple of hours earlier than usual. “We want to have our doors wide open, to let in as many as we can,” said a Wal-Mart spokesman. The chain’s sales from Dec. 9 to Dec. 15 dropped as the week progressed to finish below plan, while the plan for the final quarter is 3 to 5 percent comp-store gains. The spokesman said ice and snowstorms in different parts of the country hurt business, though outerwear and heavy clothing sales were “the strongest we have seen in the last several years” and the West has been the healthiest region for Wal-Mart recently.

Chains, across all price zones, even those in the luxury sector, have reported disappointments at one time or another in the past few weeks for a host of reasons. From Dec. 11 to Dec. 17, for example, mall sales decreased 11.9 percent according to the International Council of Shopping Centers. Precisely how stores fare for the season won’t be known until early January, when they begin reporting December sales results.

“A lot of things have been going against us,” said Mark Shulman, chief operating officer of Casual Corner. “There’s the stock market, the election, energy prices — throw all those things into the pot and it’s impacting the business.”

Last week’s stormy weather didn’t help matters, and for months. retailers have been complaining about a lack of fashion newness to stimulate shoppers. They’ve tried to take up the slack by orchestrating what many consider to be the most promotional holiday season ever. According to the Chase report, “Promotional activity is up significantly from last year, and to make matters worse, traffic appears light even after taking the late calendar into account.”

Chase said it was lowering earnings per share estimates on Ann Taylor, Intimate Brands, The Limited, Nordstrom, Saks Inc. due to “anticipated weakness” at the Saks Fifth Avenue division, as well as Tiffany and Zale due to concerns about declining sales of jewelry, which last year was among the best performing categories. [See related story, page 2] On the other hand, Chase’s “top picks” for the holiday season are Children’s Place and Talbots.

“My feeling is that Christmas 2000 has not been a surprise,” said Hal Kahn, chairman and chief executive officer of Macy’s East. “We’ve known all along what we were up against — the millennium celebrations, the slower economy, this year’s lack of fashion excitement and difficulty in men’s and home. It’s been a tough year all along. “Nevertheless, we are confident that we will hit our plan.”

“It’s a hard season to figure,” said another retail ceo. “It seems the better the store, the tougher the business. As far as department stores, they’re looking to be one or two points ahead,” by the end of month. “These last days are so enormous. There should be an enormous rush. Stores have been running negative, but by the end, if there are no more bad snowstorms, next week can be huge.”

Shulman of Casual Corner cited softness early in December, and weakness caused by last week’s bad weather. However, this week is on plan. “We’re not expecting huge things out of it. Business is a little soft, but we’re seeing an escalation late this week. We think we will have a great weekend, with Friday and Saturday very strong. Sunday will be good but will end early, by 3 in the afternoon.”

With Christmas Day this year falling on Monday, and last year falling on a Saturday, consumers have held back from shopping even more than usual. People are expected to flock to the malls this weekend, since they have the extra couple of days. Because of the shift, noted Shulman, last week was not as good.

“Most retailers should expect a very strong next couple of days. Next week, will be good, but because of all the early promotions this year, may not be as impactful. A lot of the stuff they typically bought after Christmas on sale, they’re getting before Christmas.”

While retailers have generally complained about the lack of fashion excitement, Kal Ruttenstein, senior vice president of fashion direction for Bloomingdale’s, said the store’s designer and contemporary businesses have recently been strong.

“There are some hot items that are sparking business,” Ruttenstein said. He cited leather pants, and “party pants” that are embellished, embroidered or bejeweled, as well as cashmere sweaters.

Another Bloomingdale’s bestseller: “Miniskirts in leather. Women are wearing them now with boots and under long coats. It’s a surprise of the season.”