NEW YORK — December was in many ways scarier than October for apparel retailers, but upscale, unique and online stores managed a very happy holiday nonetheless.
Retail analysts said there were some retailers who shined brighter than others, including differentiated specialty players like Urban Outfitters, Bebe Stores, Guess and Claire’s, as well as luxury marketers, like Neiman Marcus and Coach.
Additionally, online shoppers spent more of their holiday budget in cyberspace this past season than in 2002 — and apparel marketers were the biggest beneficiaries.
Overall, UBS estimated that same-store sales in December rose 2.8 percent, versus a 0.3 percent gain last year. By sector, discount and hardline stores are expected to lead the pack and grow 3.6 percent, versus a 1.4 percent decline last year. Specialty retailers are forecast to gain 1.9 percent, versus 0.1 percent last year, while department stores will turn the corner, rising 0.5 percent against a drop of 0.5 percent last year.
The majority of U.S. retailers are expected to report monthly sales on Thursday.
“December is going to prevail with decent comps,” Richard Jaffe, a specialty retailing analyst with UBS, said Tuesday on a conference call that provided a 2004 outlook and a preview of December 2003 sales.
He noted increased sales of gift cards were an important component of this year’s holiday offering. In 2002, gift card sales totaled $17.6 billion, or 8 percent of total retail sales, and UBS estimated that 65 percent of all card redemptions, or $11.4 billion, were in the fourth quarter. In 2003, UBS estimated there was a 20 percent increase in gift card sales.
What’s more, Jaffe said, consumers are coming back with their gift cards and spending more than they received. “The tool is more of a traffic builder than a top-line generator,” he said.
The survey said December sales were slowest in weeks two and three and picked up in week four, as weather improved and retailers promoted more heavily. Post-holiday sales are likely the strongest year-over-year comparison, given the favorable calendar, mild weather, modest inventory buildup and increase in gift card sales. In addition, the UBS analysts said they believed the increase in direct marketing events and bounce-back promotions versus last year — particularly at Gap, Ann Taylor, Pacific Sunwear of California, Men’s Wearhouse and Urban Outfitters — will lift sales results.
According to ShopperTrak’s National Retail Sales estimate, December sales increased by 6.3 percent on a month-to-date basis, on top of 4.8 percent growth in November.
Jeffrey Klinefelter, a senior research director with Piper Jaffray, said, “This strong finish to the season was driven by a surge in national mall traffic, rising into positive territory during the week of Christmas.” He also said he was encouraged by the relatively low inventory levels heading into the end of the fourth quarter, which should help protect profits.
December sales weren’t bad, but neither did they translate into a Christmas miracle. “Retailers were looking for a break this holiday and Old Man Winter provided no mercy in dousing the nation with snow two weekends in a row this month,” Klinefelter said of December.
Perhaps that contributed to a surge in online shopping during the month.
Consumers made about 20 percent of their nontravel expenditures online in November and December, up from 16 percent a year earlier, and apparel captured roughly $3.7 billion of their funds, up 40 percent from $2.6 billion in the prior-year period. Those findings were revealed in the Holiday eSpending Report released Monday by Goldman Sachs, Harris Interactive and Nielsen/NetRatings.
Overall, holiday shoppers made $18.5 billion in nontravel purchases online, marking a 35 percent surge over the $13.7 billion they shelled out in 2002.
“During the 2003 holiday season, online retailers went the extra mile to meet customer expectations and that’s reflected in the higher level of satisfaction, the relatively small number of serious problems reported and the increase in online spending as a percentage of total holiday spending,” observed Lori Iventosch-James, director of e-commerce research at Harris Interactive.
The online dollar volume produced by apparel in November and December was followed by sales of toys and video games, which realized a combined $2.2 billion; consumer electronics, $2 billion; computer hardware and peripherals, $1.7 billion, and videos and DVDs, $1.6 billion. The latter sector, propelled by the rising popularity of DVDs, racked up the biggest percentage gain in dollar volume versus holiday 2002, adding 46 percent.
The online results are based on a random sample of 9,517 Internet users who were polled weekly in November and December in groups of between 800 and 1,700 people.
Nearly two-thirds, or 63.1 percent, of those holiday shoppers expressed satisfaction with their experience online in 2003, up from 59 percent a year earlier, while just 7.4 percent said they were dissatisfied, down from 8 percent in 2002. Only 3.6 percent of those polled reported serious problems: 2.4 percent did not get an order when promised and 1.2 percent received an incorrect or defective item.
And while lists of winning products in holiday 2003 are surely being tallied, analysts are keen about 2004 sales and fashion trends.
“The bottom line is it’s easy to come in and be negative and say it looks like things are going to be difficult, but if you take a look back and look at the valuations, remember we have tax cuts coming and job growth,” Gary Balter, a retail analyst at UBS, said.
Noting there is money to be made in that environment, Balter said there are two groups of companies who will do well in 2004: companies who benefit with job growth, like Wal-Mart, Dollar General and Kohl’s, and those that benefit from people who have to buy clothes for their jobs, including Liz Claiborne, Jones Apparel Group and Talbot’s. Other macroeconomic positive influences include the impact of gift cards, easy sales comparisons and the rising equity markets.
In addition, despite a slowdown in spending in the current fourth quarter, analysts expect spending to pick up for spring 2004, thanks to tax rebates to the tune of $100 billion and impending brand launches from Jones, Tommy Hilfiger, Polo Ralph Lauren, Liz Claiborne and Kellwood, as well as a new fashion cycle that might compel female shoppers to replace their basic black with lime green.