NEW YORK — The holiday shopping rush let up this past week, but not enough to cause retailers to panic.
A lull usually occurs after the big Black Friday weekend, so retailers are maintaining their expectations for a decent Christmas season — at least for now.
In most cases, that will mean midsingle-digit comp gains, probably close to 5 percent, according to several retailers and industry analysts. Some said Monday that holiday 2005 is another “back-loaded” season, meaning whether retailers achieve goals will come down to the wire. There’s an extra day of shopping this year between Thanksgiving and Christmas; consumers continue to last-minute shop, expecting markdowns to deepen as days pass; Hanukkah this year starts late, on Christmas Day, and gift cards continue to grow in popularity and largely get redeemed right after Christmas and into January.
This week, there should be a buildup of 30 to 50 percent off promotions, two-for-one and “friends and family” deals, and a shift to greater gift shopping as opposed to the unusually high level of self-purchasing that retailers have noticed in the past couple of weeks. There could be a challenging few days ahead, considering retailers are up against snowfalls and Hanukkah, which occurred this week a year ago. Snow on Sunday stole some business from retailers, mostly in Northeast and New England states, but traffic was still strong in Manhattan.
“It’s an uneven season, with lots of stops and starts,” said Isaac Lagnado, president of Tactical.org., a consulting firm. “It won’t be a terrible season, but I think retailers will come out with 4 percent comps. The customer is more fickle than last year and there is a slight climate of uncertainty,” Lagnado said, citing gas prices and plant closings.
Last month, the National Retail Federation raised its projection for retail sales gains for holiday to 6 percent, to $439.5 billion. Wal-Mart expects December comparable-store sales to be up 2 to 4 percent in December, and last week food sales were stronger than general merchandise. Federated is projecting comps up around 1 to 2 percent for the fourth quarter.
“It’s going to be an OK Christmas,” said Michael Appel, managing director of Quest Turnaround Advisors. “The week after Thanksgiving is usually a smaller [volume] week because people take a breather.” He added that retailers examine closely how daily sales fare against the day’s plan and, based on a week’s results, decide whether to promote more or stay the course. While one top retailer said this week’s promotions already are planned in advance, it’s not too late for some tweaking.
This story first appeared in the December 6, 2005 issue of WWD. Subscribe Today.
“Our performance is within an acceptable range of our plans,” said Ron Klein, chairman and chief executive of Macy’s East. “There is still a lot of time between now and the holidays.”
“There’s no irrational exuberance,” said one specialty store executive. “People are being careful about how they spend. They are making thoughtful purchases for items with versatility.”
“You are probably looking at a slowing down Monday, Tuesday and Wednesday, and then a lot of retailers will get right back to the promotions, at 40 [percent] off, 30 off and buy-two-for-one kind of scrambling,” said another specialty chain executive.
However, certain retailers were optimistic. J. Crew’s president, Jeff Pfeifle, said, “We are feeling good about the next few weeks. We are seeing customers not only buying gifts, but still buying for themselves. So many people have waited to do their fall shopping.”
“We had a very strong November and are well positioned for Christmas,” said Richard Crystal, chairman and ceo of New York & Co. “There is still a long way to go.”
“I can tell you we had a very good week,” said Bloomingdale’s chairman and ceo, Michael Gould, though he acknowledged a snow-related blip in some markets on Sunday, such as Westchester and New Jersey, but not the 59th Street flagship, which had a strong day. He said the chain in the first week of December is ahead of plan and ahead of last year’s business in “each major family of business.”
Galleria Dallas said traffic and sales were up by double digits last week, with luxury items the most popular, according to Peggy Weaver, mall general manager, who said the best-selling categories were fine jewelry, leather goods, epicure and apparel. “We’ve also seen a 30 percent increase in gift certificate sales,” she added.
And Fortunoff’s executive vice president for jewelry merchandise, Ruth Fortunoff, said the chain expects a single-digit gain over last year for the season.
According to a report from Merrill Lynch analyst Mark A. Friedman, “Shopping patterns tend to slow post-Thanksgiving until the final seven days, when markdowns of 40 to 60 percent off kick in. Cold weather and snow in parts of the Northeast and Midwest could have sparked some seasonal self-purchase need items.
“Promotions in the specialty segment, for the most part, remain in line and planned at this point. However, we believe mass market players have stepped up their promotions and not all are planned. We believe that this could put some additional pressure on more mainstream players like Gap, [American] Eagle [Outfitters] and Old Navy.”
Friedman added that the season seems “split with success at the higher end, including Coach, Abercrombie [& Fitch] and Williams-Sonoma, and then at the lower end, where there are “deals”: Aéropostale, Children’s Place and Gymboree. This could translate into a 1 to 3 percent upside on sales for these names, but some pressure (about the same 2 to 4 percent) on more midline names.
Other standouts among specialty stores include New York & Co. and J. Crew, which, like Abercrombie, are capitalizing on the colder weather, novelty sweaters and demand for cashmere.
Some, such as Fortunoff’s, have benefited from intensified shopping incentives from coupons to cash gifts.
“We continue to feel very confident about the holiday season,” said Tom Lennox, director of corporate communications at A&F, where polos and fleece have been strong in men’s, while in women’s, knit tops, fleece and any fur-lined or fur-trimmed outerwear has been selling best. Denims are also strong in both genders.
J. Crew cited cashmere T-shirts priced at $138 and beaded Fair Isle cardigans priced at $115, and said that each week, the chain updates the stores with new setups for men’s and women’s merchandise at the front.
At Talbots, anything with “glitz or glam or emotional appeal” has been selling, said Margery Myers, spokeswoman, who cited a shawl-collared velvet jacket, priced at $208, with coordinating wide-legged satin pants at $134; a metallic V-neck sweater in gray or gold or black at $88; puffer vests in bright colors, $78, and novelty cashmere sweaters, $148..
At Fortunoff’s, “Christmas is going very well,” said Ruth Fortunoff. She said the season has been lifted by a new catalogue called the “Fortunoff 100 Gift Gallery,” which combines home, entertainment and jewelry in one book, and an Italian import promotion featuring food, wine, jewelry and home products, and a lot of special demonstrations and designer appearances that began at the White Plains, N.Y., store Sunday and continues at the Westbury, N.Y., store Thursday. Other Fortunoff stores also are participating, but not to the same degree.
“We have added a lot of different incentives to bring people into the stores,” Fortunoff added, citing “mystery gift cards” worth $10 to $1,000 that were inserted into several hundred thousand catalogues, as well as free engraving and free shipping services.
Among Fortunoff’s bestsellers are diamond starburst pendants and diamond “circle of love” necklaces, as well as beveled diamond earrings and diamond chandelier earrings. As a footnote, Fortunoff said she expects this week will be its biggest of the year for sales of Christmas trees and ornaments.