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Retailers are playing a waiting game just six days before Christmas, looking for serious last-minute customer traffic to make the season a success.
December has been tepid because of several factors: Procrastination has become the order of the day for many bargain-hunting shoppers; warm weather in the East has dampened demand for outerwear, cold-weather accessories and sweaters; the lagging housing industry chilling consumer spending, and the absence of must-have or hot items.
The doldrums could also reflect the surprising restraint that some retailers have shown in advertising markdowns and consumers anticipating more later. Price promoting has been relatively subdued since after Thanksgiving weekend and generally no more severe than last year, although analysts said markdowns are visible once in the stores and that Kohl’s and J.C. Penney have been among the most aggressive promoters.
“There is not a significant difference in the trends that were established in the beginning of the month,” Ron Klein, chairman and chief executive officer of Macy’s East, said Monday. “Clearly, warmer temperatures in the geographic areas where Macy’s East trades are having difficulty with cold-weather giftables, but there is plenty of time between now and Christmas. I think it’s going to be a mad rush at the end.”
Klein cited handbags, watches and cashmere as among the stronger categories, and outerwear and cold-weather accessories are weak. Other retailers also have cited dresses, luxury goods, fragrance and jewelry as pacing the business.
“We anticipate a big week this week and this coming weekend,” said a spokesman for Sears Holdings. “We have our circulars going out announcing our specials for the weekend and extended store hours.”
The company said it’s lowering prices on last-minute gifts in electronics, tools, games, apparel and jewelry.
“Business is off compared to last year, in spite of the fact that shoppers rave about my collection,” said Mary Jaeger, of the shop bearing her name at 51 Spring Street in New York’s SoHo. Jaeger sells limited-edition women’s accessories and items such as wraps, capes, shibori T-shirts and jackets.
“I’d love to use [unseasonably warm] weather as an excuse — most retailers would. I’m sure it has something to do with it…but I just think people are waiting until the last minute,” said Herman Heinle, president at Gus Mayer, a better specialty retailer in Birmingham, Ala., and Nashville, where sales are off from last year by a few points.
This story first appeared in the December 19, 2006 issue of WWD. Subscribe Today.
“There is every reason to believe people are pushing things out to a later deadline, which usually happens when Christmas falls early in the week,” said an L.L. Bean spokesman, who added that sales at L.L. Bean’s 22 stores are tracking in line with last year.
To some extent, the malaise in the malls and on America’s Main Streets is being offset by proliferating gift card sales, which aren’t recorded as revenues until they get redeemed for merchandise, and Internet sales.
The National Retail Federation projected gift card sales hitting $24.8 billion, versus last year’s $18.5 billion.
“It’s hard to say how the season will end up because gift cards are so tremendous, and for some companies, the Internet has been very strong. But on the floor, retailers are not seeing the traffic they anticipated,” said Walter Loeb, a retail analyst. “They are quietly taking markdowns, particularly in the East where the weather has been much too warm. Retailers are trying to be clean and lean.”
ComScore Networks, which tracks online sales, said from Nov. 1 to Dec. 15 online retail spending reached $19.48 billion, up 25 percent from the same period last year.
“Retailers have been aggressive this year with their online marketing efforts, targeting consumers with early-season promotions,” Gian Fulgoni, chairman of comScore Networks, said in a statement. “The growth rate of online retail spending accelerated during the latter part of last week, with sales on Friday growing 38 percent versus the corresponding day last year. This demonstrates consumers’ willingness to rely on retailers’ late-season shipping guarantees.”
Brendan Hoffman, president and ceo of Neiman Marcus Direct, said, “As more and more people get comfortable with being online and having high-speed Internet access at home, that certainly helps extend the day and weekend so business isn’t confined to when people are at work. They’re doing more shopping at night and on the weekend.”
Designer jewelry has been exceedingly strong online, along with designer sportswear, shoes and handbags, he said. In jewelry, “the price point is moving up. That’s the biggest trend. It’s not uncommon for us to sell $10,000 pieces online these days.”
Walmart.com continues to see strength in electronics, toys, apparel and jewelry. The company expects increased response to its gift baskets and gift cards through Wednesday. Walmart.com’s deadline for standard shipping was Monday. The deadline for two- to three-day shipping is today. One-day shipping ends tomorrow.
Target Corp. on Monday reaffirmed its December sales forecast for same-store sales for the five weeks ended Dec. 30 to rise between 3.5 and 5.5 percent.
Retailers anticipate bigger crowds this week and next based on traffic patterns over the last several years. Merchants could help generate traffic by unleashing price promotions, though Klein said that’s not in Macy’s agenda. So far, retailers don’t appear to be panicky. Last week in major newspapers, ads seemed as equally weighted on promoting gifts, such as watches fragrance and cosmetics, as on price breaks. Nordstrom ran full-page ads to promote its gift card, while Lord & Taylor advertised 50 percent off a lot of outerwear, and cashmere sweaters sliced from between $120 and $130 to $69.99. Saks Fifth Avenue offered 30 to 50 percent off a selection of furs. Bloomingdale’s advertised slightly higher savings on furs and its biggest sweater sale of the season at 25 percent off. Macy’s ran discounts primarily in the 50 range for many gifts.
Some stores are getting a lift from early spring and resort selling. Jim Gold, president and ceo of Bergdorf Goodman, said, “We are seeing a lot of local and foreign clients and they are reacting just as we hoped to early spring deliveries,” which started to roll into the store in the second half of November.
Gold said about one-third of the ready-to-wear has transitioned to spring. “The designers continue to place greater and greater emphasis on early deliveries. We love to take advantage of the holiday traffic and our core clients are interested in full-price, new receipts. Our rtw business has been very strong,” as have shoes, jewelry and handbags, he said.
Holt Renfrew, Canada’s luxury chain, is having a similar experience. “In women’s rtw with our new resort receipts, we’ve had some terrific selling from Marni, Prada, Etro, Giorgio Armani and Akris Punto,” said president Caryn Lerner. “Our resort sell-throughs are averaging 10 to 15 percent per week. Most of the goods hit between the last two to three weeks.” About 25 percent of the designer floor has transitioned to spring, she said.
For the season overall, Lerner acknowledged that retailing generally is tough. “But we’re actually having a pretty decent holiday season. Last week, our business was up over 15 percent, and for the month, we’re running close to 15 percent, so we really aren’t complaining.”
Mark Montagna, analyst at CL King & Associates, sees some moderate retailers also selling spring. “Retailers positioned for gift card selling want to have spring product in the stores this week because of [potential] full-price selling next week. Gift card [holders] tend to spend more at full price than those using their own credit cards.”
In Boston’s Beacon Hill, boutiques reported brisk sales. “Our weekday mornings have been busy….Even Sundays, which can be hit or miss, have been great this holiday,” said Jessika Pavlic, owner of Holiday on Charles Street.
At J. McLaughlin, “our customers are spending a little more this year,” on average $300 to $500, said manager Diane Chau. Popular gifts include crewneck cashmere sweaters paired with printed silk vests, both priced at $175.
The Pacific Northwest was socked with three storms in the last two weeks, knocking out power in many areas, including the Bellevue Collection shopping center, east of Seattle. Jennifer Leavitt, vice president of marketing for Kemper Development, which owns The Bellevue Collection, said power was out for about 24 hours, but Nordstrom stayed open later than others in the center Friday night, using flashlights and candles.
Weekend sales were between 3 and 5 percent up over last year for General Growth Properties, which operates more than 220 malls. Gift card sales were up 20 to 25 percent last week. At Atlanta’s Lenox Square, Dewayne Herbert, marketing director, said, “We were very pleased with the traffic and sales levels, with most of the retailers reporting positive sales growth on Saturday and Sunday,” despite temperatures in the 70s.
Traffic at Westfield Garden State Plaza in Paramus, N.J., has been flat to 2 percent higher, said Lisa Hermann, marketing director.
The National Retail Federation’s 2006 holiday consumer intentions and actions survey, conducted by BIGresearch, found that 23 million consumers (10.8 percent) have finished their holiday shopping, but 33 million shoppers (15.4 percent) haven’t even started. The average person has completed 53.1 percent of their shopping, compared with 54.6 percent at this time last year.
Men will comprise the majority of last-minute shoppers, with 17.8 percent stating they have not begun, versus 13.1 percent of women. The research firm predicts a big week for department stores, as 47.6 percent of those polled stated that’s where they headed to finish their shopping. Only 39 percent of last-minute shoppers will go to discounters, a large drop from the 70.3 percent of consumers who planned to shop at discounters earlier this holiday season. The survey polled 7,828 consumers from Dec. 5 to 13.
“Just like every year, people are procrastinating,” said Chana Taft, director of retail operations and real estate for True Religion. “I think it will be consistently strong for the rest of the season now.”
— With contributions from Sharon Edelson, Emili Vesilind, Kate Bowers, Georgia Lee and Holly Haber