WWD.com/retail-news/retail-features/holiday-kickoff-despite-strong-start-retailers-still-cautious-591708/
government-trade
government-trade

Holiday Kickoff: Despite Strong Start, Retailers Still Cautious

Must-have products, good weather and pent-up demand drew shoppers to stores on Black Friday.

View Slideshow

NEW YORK — Even as shoppers flooded their stores over the weekend, spending $23 billion on everything from flat-screen TVs to fur-trimmed tops, retailers stayed cool and cautious in their holiday outlook.

Consumers were driven by doorbusters and pent-up demand as they sought out electronics, toys, jewelry and gift cards. Other leading categories included accessories and apparel, especially products that offered luxury and exclusivity.

Specifically, DVD players, iPods, cashmere sweaters, diamonds, fur trim tops, handbags, boots and contemporary sportswear kept most retailers on track, buoying their holiday expectations, though not enough to adjust forecasts upward. As reported, projections call for about 2 to 3 percent comp-store gains and total sales gains a couple of points higher.

While off to a good start, with widespread reports of huge crowds besieging such stores as Target, Best Buy and Macy’s at both malls and downtown locations, the big turnouts can be deceptive, retailers acknowledged Sunday. The Christmas season is a prolonged and unpredictable run, they cautioned. Some also said that Saturday’s business was not nearly as heady as Friday’s and despite the overall success of the weekend and business getting progressively better, uncertainty remains a major component to the season.

As has been the case for years, discounting and coupons will be ubiquitous, yet many retailers stressed their stores are equally or less promotional than last year, which throws another layer of uncertainty into the cake, aside from weather concerns. They’ve come to realize that the post-Thanksgiving weekend is not a reliable barometer of things to come.

“I am pleased the customer is responding to where we made big significant investments,” said Ron Klein, chairman and chief executive officer of Macy’s East, citing cold-weather merchandise, color across all families of business, iPods, gourmet cookware and cashmere. “I am optimistic, but I can’t read too much into it. This is the beginning. We have to see what happens. Last year, we were clearly impacted by blizzards. Climactic conditions made things extraordinarily difficult.”

According to Michael Gould, chairman and ceo of Bloomingdale’s, “The two days [Friday and Saturday] combined had a better trend than the first 25 days of the month. Is that a trend [going forward]? I don’t know, but it sure beats a poke in the eye.”

Gould said he spent seven hours Friday and Saturday visiting stores in Manhattan. The mood on the street: “People are in good spirits, they’re looking to buy and stores look strong, and the amount of tourists in New York is outstanding,” he said.

“Overall, we are hoping it will be a strong season, but it’s too early to call,” said Tom Lennox, director of corporate communications for Abercrombie & Fitch, which has been experiencing strong sales in men’s and women’s denims and fleece, as well as men’s woven tops, among other areas of the store. “Last month was the strongest we had in over four years. The reason we don’t know how things are going to go is because last year we promoted heavily between Black Friday and Christmas. This year, we will not promote until a day or two before Christmas, so it’s difficult to compare. We made that commitment. We think it’s good for the brand.”

“On Saturday, it warmed up and slowed up,” said Ken Lakin, chairman and ceo of Boscov’s, the Pennsylvania based department store chain. “But both days were very busy. Combined, they were about even as last year. It’s hard to read a lot into it, but I think it can be a good December.”

“The couple of days after Thanksgiving have actually become less important than those after Christmas, but this year, it did feel like there were more people out earlier in the stores, with Thanksgiving falling later this year,” said William Susman, president and chief operating officer of Financo Inc. “It will be a real test, to see if now it quiets down until the week before Christmas or if the traffic keeps its momentum. Every holiday year is different, but there is a pent-up demand,” particularly for “distinctive basics — something that looks new and unique but something that you generally use, like a Coach bag.

“Based on our Black Friday store checks, the 2004 holiday shopping season seems to be off to a good start, with strong traffic and ticket, especially at discounters and moderate department stores,” said Deborah Weinswig, equity analyst with Citigroup Smith Barney in a research note released late Friday. “We believe traffic was driven not only by doorbusters and circulars, but also other in-store products. Favorable weather conditions further helped to bring traffic to retailers and in particular, sales of seasonal merchandise.”

Weinswig said key categories of interest included “women’s apparel, consumer electronics, toys, jewelry, and seasonal merchandise.” She also said gift cards were heavily promoted, “and we expect gift card sales to increase approximately 30 percent year-over-year.”

According to the National Retail Federation survey conducted by BIGresearch, 133 million shoppers flooded stores Friday through Sunday, spent $265.15 on average, bringing total weekend spending to $22.8 billion, representing more than 10 percent of the $220 billion expected in total holiday sales this year. “Retailers know that the holiday season is not a sprint, it’s a marathon,” NRF president and ceo Tracy Mullin, said in a statement. NRF stuck to its projection earlier this month that there will be an increase of 4.5 percent in holiday sales this year over last year, bringing estimated revenues of $219.9 billion this holiday season.

“It seems to me in the last five or six years that [Thanksgiving] might not be as much as of an indication for the overall period as it once was,” Marcy Syms, chief executive of Syms Corp., said Sunday. “Shopping the Friday after Thanksgiving has become a sport, a family get-together. People go shopping and to a movie, but that doesn’t indicate if they are going to increase their budget for the season. Friday was terrific, traffic was high and people were spending pretty well across the board from higher-ticket items to smaller gifts items.” The next day was different. “For us, Saturday came right back down, and I can’t imagine much activity in the Northeast today,” due to the windy and rainy weather.

Assessing the season’s mood, Syms said: “Right now, it feels good, but don’t get carried away.”

Mass and Class

On a down note, Wal-Mart said its sales last week through Friday fell below plan. Same-store sales for the U.S are estimated to be 0.7 percent for November. The strongest categories for the U.S. are bedding, food, and pet supplies. For the day after Thanksgiving, strength in blitz items included digital cameras, TV/DVD combos, learning toys, and video games. The Southeast and the West were the strongest regions for the week. The average ticket was essentially flat, while customer traffic declined towards the end of the week, the retailer said.

Meanwhile, J.C. Penney said it had its best Black Friday ever and a record breaking weekend, but would not divulge numbers. “All merchandise categories had positive sales gains. We think our early morning doorbusters went very well,” said Quinton Crenshaw, a Penney’s spokesman. He said markdowns were on par with a year ago, though there were more promotional items available. Among the bestsellers were boxed jewelry sets, gold and gemstones and diamonds, cold-weather scarf and glove sets, footwear (led by boots), outerwear, fleece activewear, pet gifts, luxury items including cashmere sweaters and fur-trim tops.

Sears, which has long been struggling, lured in record crowds across the country on Friday with early morning specials, $10 gift cards and revamped stores, according to Chris Brathwaite, a spokesman.

“When stores opened Friday coast-to-coast, we did a sampling of the largest cities and there were hundreds of people waiting to get into the stores before they opened,” he said. “In the largest store in Westminster, Col., 1,300 people were waiting in line versus 200 last year.” Doorbusters included DVD players, priced at $19.99, while digital cameras were being sold at $49.99, and sweaters were 50 to 60 percent off; outerwear, 60 to 70 percent off; and fine jewelry such as sapphire, ruby, emerald and diamond bracelets originally priced at $599.99 were being sold for $179.99. Brathwaite said top-selling sectors in many of Sears’ 871 U.S. stores included apparel, home electronics and home furnishings.

“In Pennsylvania, we sold a lot of flannel sheets due to the first cold temperatures on Friday,” he said, adding that outerwear, footwear and Eagles sportswear were also selling briskly.

Stores in the Dallas area did well with leather coats, shoes and fine jewelry and stores in San Diego sold electronics, home improvement items and men’s and children’s apparel. “What this all portends for sales, I can’t say, but this is a solid sampling of stores and we are hearing a lot of excitement in the field.”

At Target’s CityPlace store in downtown Dallas, crowds scooped up fashion, electronics, bath and fragrance sets and lots of music, with many vowing to be back the next weekend to check out the sales.

“I love Target because they have the trends young people want at affordable prices,” said Anna Hinojosa, a 14-year-old high school student visiting Dallas from south Texas who picked up some Isaac Mizrahi styles for herself and a jacket to give her mom for Christmas. “Mom will think I spent a lot of money on this, but there was cash left over for me.”

For more upscale retailers, “It’s a luxury moment,” said Jim Gold, chairman and chief executive of Bergdorf Goodman. “We had very robust traffic. Friday was really, really busy,” due to a heavy influx of tourists as well as core clients, he said, citing men’s luxury sportswear and outerwear, women’s jewelry and accessories and contemporary sportswear. For the weekend, “We exceeded our plan. It didn’t surprise us. Business this season is quite good. It’s a continuation of the healthy environment that we are experiencing for luxury and fashion.”

Markdown Management

That trend is fostering a reduction in price promoting. “As opposed to our competitors, we made the conscious decision to be all about regular price,” Gold said. “We are not in a promotional stance. There are virtually no sales in the store at this juncture.” Customers, he added, appear to be motivated by interesting novel products, and not by a sales environment. “We had a very strong reaction to new resort fine apparel deliveries, which have been rolling in the last couple of weeks.” He cited Akris, Loro Piana, Chanel and Dolce & Gabbana.

One competitor that also made the decision to reduce markdowns is Bloomingdale’s. “There’s no question about it. We’ve reduced promotionality,” said Bloomingdale’s Gould. “The average unit sale is up over 10 percent for the year.” He also said the company dropped a pre-Thanksgiving sale this year which last year was held the day before the holiday, and this year, the chain beat last year’s volume on the day.

In the Washington D.C. area, the first cold temperatures generated brisk sales of outerwear, but the retail picture was uneven. Stores including Macy’s, Hecht’s and Bloomingdale’s offered deep discounts and coupons and consumers appeared to be buying, but they first had to read the fine print on the coupons to see what they were really entitled to. For example, Macy’s offered a $10 coupon on any sale or clearance purchase on Friday and Saturday until noon but restrictions applied. The store also offered an “all day shopping pass” giving an extra 20 percent off. Bloomingdale’s, on the other hand, offered $15 gift cards with every $100 purchase.

While Bergdorf’s and Bloomingdale’s are getting more gift oriented to capitalize on the season, that’s not for everybody. “We have the anti-Christmas, Christmas crowd,” said Nancy Pearlstein, owner of two upscale contemporary stores in Chevy Chase, Md. and in Georgetown, named Relish. “As always, we are not a Christmas store. Nothing is on sale and we are not in a mall.” She said holiday selling trends included coats, coats and more coats. Pearlstein did well with down coats, tweed and cloth coats and fur-trimmed coats. “Sweaters are fair,” she said. “They are going more for coats, below-the-knee, tweedy skirts and hats, like knitted berets, and gloves,” Pearlstein said. “This holiday will about the same as last year for us. I don’t think it will be exciting,” said Pearlstein. “It’s not the end all of Christmases.”

Scenes from the Malls

At Tysons Corner Center in McLean, Va., traffic “was up significantly over last year,” according to Eric Kulczycky, marketing and public relations director for the shopping center anchored by Nordstrom, Bloomingdale’s and Hecht’s.

“Retailers remarked that sales are strong and shoppers aren’t as frantic as they were last year,” said Kulczycky. “Retailers are a little puzzled. They said they are making their numbers, but shoppers are not as frantic.”

That translated into less “penny pinching” and more of a willingness to buy accessories, he said.

Overall, Kulczycky said the shopping center’s foot traffic was significantly up over last year, which logged in over 80,000 people.

“This year should be significantly higher,” he said. “Black Friday is exceptionally busy for us this year.”

Galleria Dallas, a popular shopping and international tourist destination, had more than a 20 percent spike in traffic over the weekend including the best Black Friday traffic in the mall’s 23-year history, according to Peggy Weaver, senior general manager.

“Luxury stores selling apparel, fine jewelry and small electronics were especially strong this year, and fashion bestsellers were ponchos, fur, anything pink and lots of diamonds,” said Weaver, noting that the mall just completed a massive 15-month renovation. Among its tenants are Saks Fifth Ave., Nordstrom, Macy’s and designer stores such as Celine, St. John and Versace.

Ylang Ylang, a high-end fashion jewelry store located at Galleria Dallas, said the hottest item was Mary Margrill’s “I Am Blessed” pendant, at $355 in white or yellow gold and diamond accent.

“Our Thanksgiving weekend sales are about 20 percent above last year, and we attribute the gain to a more upbeat consumer and economy. Our sales are running close to 25 percent up for the year,” said Joanne Teichman, managing director, citing other bestsellers such as Cathy Waterman’s colored stone pendants and rings and a range of styles from Ten Thousand Things, Dana Kellin, Me & Ro, Jeanine Payer and Barry Kronen, which scored with initialized lockets.

Among Taubman Centers properties, Beverly Center in Los Angeles reported that its traffic count on Saturday was double digits ahead of last year. Two tenants, Pottery Barn and Solstice, said regular priced merchandise was outselling sale goods on Saturday. And The Mall at Short Hills in New Jersey reported that most stores expected low to mid single digit increases Saturday when valet parking was up 10 percent over last year.

Meanwhile, MasterCard International said credit transactions over its Banknet global communications network increased 9.29 percent year over year for Friday and Saturday, processing 64.2 million credit authorizations, compared to 58.7 million in 2003. On Black Friday, there were 53.1 million transactions against 31.8 million the year before.

— With contributions from Georgia Lee, Rusty Williamson, Michelle Dalton Tyree and Kristi Ellis

View Slideshow