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Happy Holiday After All: Last Week’s Boom Has Stores Smiling

Retailers across the price spectrum couldn't hold back raving about the post-Christmas week they said put them back on track for the month.

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NEW YORK — What a difference a week makes.

While stores previously bemoaned what appeared to be a poor holiday season right up to Christmas, retailers across the price spectrum on Monday couldn’t contain their raves about the post-Christmas week, which many said put them back on track for the five-week December sales period.

Mostly, they were thankful for bargain-crazed consumers conditioned to shop after Christmas when markdowns are at their steepest and when shoppers have cash, gifts to exchange and gift cards to redeem. The late lift also came from tourists taking advantage of the weak dollar, and from favorable weather.

“There is one argument that the period between Dec. 26 and Jan. 1 is one great American shopping holiday and that the news has gone out overseas,” said Ron Klein, chairman and chief executive of Macy’s East. “There were a lot of people from around the world shopping Herald Square. We were amazed. The post-Christmas performance, indeed the last 10 days, exceeded expectations. I was pleased to see an increase in the average unit retail price across the board, whether it was women’s ready-to-wear, or center core,” which includes cosmetics, fragrance and accessories.

“It was a great week. Ready-to-wear was just unreal, and a lot sold at full price,” said Michael Gould, chairman and ceo of Bloomingdale’s. “Our business in Florida was just unbelievable. We transitioned it to spring very quickly and got a tremendous play. California was also very strong.”

He said Bloomingdale’s would come out with an increase in December (though he wouldn’t specify how big) even though the chain reduced its post-Christmas promotional stance, including offering no doorbusters. “That being said, we wish there was more [business] but we feel good about spring, though spring is a tougher comparison,” said Gould.

Federated, which operates Macy’s and Bloomingdale’s, is expected to report low single-digit comp increases for December. May Co. is expected to be in the negative zone. Most retailers will report comp-store sales on Thursday.

Ken Lakin, chairman and ceo of Boscov’s, the private, Pennsylvania-based department store chain, said, “Business did come on strong at the end, and people seemed to use their gift cards right away. They’re getting a good bargain and they’re still finding a selection of sizes and colors.” He added that due to traffic picking up close to Christmas and the week after, “we met or maybe exceeded our projections for the five-week December period.”

Discounters and off-pricers also felt the surge. Wal-Mart estimated Monday that its comparative store sales for the five-weeks from Nov. 27 through Dec. 31 would be up 3 percent, at the high end of previous estimates of 1 to 3 percent, reflecting greater traffic last week. The world’s largest retailer also said that “food and general merchandise sales were above plan last week and that gift card redemptions were up significantly over last year. The Midwest was the strongest region and [higher] average tickets drove the comps. Sales for this past weekend were above plan.”

“The increase [in comp store sales] we had the post-Christmas week was greater  than the week prior to Christmas,” said Marcy Syms, ceo of Syms Corp., the off-price chain. “The week preceding Christmas was up 3 to 5 percent, and the week after was 7 to 9 percent. We’re actually a little ahead of plan [for the month] due to the post-Christmas week. After-Christmas shopping is just as hectic as before, but the difference is consumers are not gift wrapping; they’re buying for themselves, with cash, returns and gift cards.” Syms said the trend toward post-Christmas shopping really started taking off five to six years ago.

Even struggling Kmart Corp. said during November and December, there was a “significant moderation” in its rate of same-store sales declines. December was down about 2.6 percent, and November and December combined was down 4.6 percent. In the same two months of 2003, sales plummeted 13.5 percent. Kmart said Monday that it expects to generate net income, excluding any asset or bankruptcy-related expenses, of about $250 million for November and December, and income before interest and income taxes of about $400 million. This represents an increase in net income of about $23 million, or 10 percent over the same period in 2003.

Luxury retailers also felt the rush last week. “The store was just packed,” said Jim Gold, chairman and ceo of Bergdorf Goodman. “There was a real balance of locals and tourists, domestic and foreign. As we’ve reported in the past, regular-price selling has been very good. Also, after-Christmas promotional business was quite strong, as well.”

For  December, Bergdorf’s strongest categories were women’s designer sportswear, shoes, handbags, jewelry, home, men’s sportswear and furnishings.

Still, retailers and analysts maintained reservations when it came to assessing the season overall. “Americans must buy gifts, but they did not make it a thrilling ride for retailers,” said one ceo.

Claudio Del Vecchio, chairman and ceo of Retail Brand Alliance, which operates Brooks Brothers, Casual Corner, Adrienne Vittadini and Carolee stores, said he was happy how the season concluded but not about the way it began. “We almost made plan for the company,” with Casual Corner just missing plan and Brooks Brothers beating the plan.

“All of our divisions had a great week after Christmas,” he said. “People took advantage of the discounts the day after Christmas.” He said increases came more from increased store traffic rather than gift cards, which his company didn’t push as hard as other retailers. “We ended up doing the business on a little bit of everything, including the basics.”

He added that 100,000 shirts, mostly wrinkle-free, in the post Christmas period were sold, though sweaters and blazers also moved.

“Retailers definitely had a lot of concerns that they were going to have a sluggish December. It ended up being just really choppy,” said Deborah L. Weinswig, analyst with Citigroup Smith Barney. Noting the significant impact of gift cards, she said that with broadline retailers, “We typically see 20 to 30 percent of gift cards are redeemed in the week following Christmas, and then by the end of January, 70 to 80 percent.”

In her report on December, Weinswig wrote that “luxury players, including Neiman Marcus Group, that delivered things of bling to customers should perform in line or slightly better than our original expectations. However, the more moderate retailers, including Federated and May, where key item excitement seemed to be lacking, will most likely be on the low end or below plan this month.”

As Mark Montagna, senior analyst with Wells Fargo Securities, said, “Christmas was nothing spectacular. I bet you the three days after Christmas this year wasn’t as high as the three days last year,” since Christmas last year fell on a Thursday, as opposed to Saturday this year. However, the calendar impact would be offset somewhat with the increase in gift cards, meaning more spring merchandise would have been purchased, he suggested.

The week, plus the two days just before Christmas, “probably got most retailers back on plan for the month. Most were running below plan after the third week,” added U.S. Bancorp Piper Jaffray analyst Jeffrey Klinefelter. Still, he described the season as “OK, on plan, but certainly not ranked as one of the better holiday seasons.

“The sales growth rate overall will be generally on plan, but below the growth rate of last year. The level of profitability may in fact be equal to last year due to better inventory management.” Profits at higher-priced department stores would be better than lower-priced department stores, said Klinefelter.

Gift cards certainly played a role in boosting stores last week, “but I don’t think they can explain the entire rate of acceleration,” Klinefelter said. “Everyone from Wal-Mart to teen retailers really benefited from strong traffic, though the teen sector tends to see a much higher gift card redemption rate [earlier],” which retailers in the sector have told him can be as high as 50 to 75 percent the week after Christmas.

The improved sales trend last week means retailers can transition faster into brighter colored and lighter-weight fabrics for early spring selling.

At department stores, the transition is most apparent in accessories, a leading category. “Accessory areas have been transitioned already,” said one retail source. “We feel that we have transitioned better than last year.” That applies to women’s wear as well, which he said reflects spring colorations, though still is wear-now weight.

According to analysts and retailers, luxury stores have about one-third of their selling floors displaying resort and spring, a selling period that for them extends from November through April. More moderate-priced specialty chains have roughly 10 to 20 percent of their floors stocked with spring goods.

According to Klinefelter, “There are a lot of bold colors out already in specialty as well as department stores. Most of them will be describing a spring floor set happening earlier.”

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