STORES RING UP YULE GAINS AS COOL WEATHER BRINGS SHOPPERS OUT
Byline: David Moin / With contributions from Melanie Kletter / Thomas J. Ryan, New York / Teena Hammond, Los Angeles / Rusty Williamson, Dallas
NEW YORK — In another good stretch for retailers, holiday sales rose around 5 percent last week, store executives said Monday, with strong trends continuing in luxury items, jewelry, accessories, evening attire and home.
Stores ranging from Neiman Marcus to Wal-Mart even cited healthy sales in outerwear, which for most of the season has suffered from warm weather.
This time of year, stores expect a lull in traffic. Few have seen it, and several suggested that business will accelerate as the weekend nears.
But no one is taking anything for granted. Price promoting continues as heavy as ever, inventories are being kept lean, and some retailers said that with business currently running strong, the usual Christmas shopping rush in the few days before the holiday might not carry as much wallop as in recent years.
Patterns of years past just don’t seem to apply this year.
“I’m old enough to know that every day in this business is an adventure,” said Michael Gould, chairman and chief executive officer of Bloomingdale’s. “There are no trends anymore. You have one good day, and I don’t know if there’s any anticipation of it [again.]”
Still, Gould said last week and the weekend were “OK” and that his chain was on track, posting mid-single-digit gains. “We did not see a lull,” he said.
A more bullish Michael Steinberg, chairman and ceo of Macy’s West, said last weekend “really was the biggest weekend of the year. We were a little above the planned level, so it was good.”
Cashmeres were “off the wall” and represented the strongest part of the fashion business; fleece and sweaters were very good, Steinberg said.
“I think the traditional collections business [Macy’s Club-house department] is the weaker part of the business.” Fashion isn’t in a collection cycle now, Steinberg said, with customers opting for items to put together outfits on their own.
As far as promotions, “I don’t see how it can get more promotional,” Steinberg said. “If it’s going to be more intense than a year ago, I don’t know. Our stock is in good shape. I don’t think it’s time to panic. I think we’ll liquidate our inventories and we’ll be in fairly decent shape.”
At Wal-Mart, “Same-store sales for the week ending last Friday were well on our company expectations of a mid-single-digit increase,” said a spokesman. “We are expecting same-store holiday sales growth of 5 to 7 percent at the discount stores and a mid-single-digit range for Sam’s Clubs. Cool weather is helping bring customers into the stores and drive seasonal areas and most women’s apparel, accessories and outerwear.” Household basics, sporting goods, small appliances, bedding and food areas also did well at Wal-Mart, he added.
Many specialty chains, including some that have recently been less than stellar, rode the tide. “Overall, we’re doing pretty good, with some areas stronger than others,” said Carlo Tunioli, executive vice president, Benetton USA Corp. “Florida is strong. The West Coast is not as significant as we thought, but we can’t really complain. We haven’t see an impact of the [Internet]. We’re not online yet. Probably, next fall we’ll launch.”
Benetton, he acknowledged, has experienced some ups and downs this season. “There is this kind of rhythm,” Tunioli explained. “You slow down a little bit, and then you hold your breath. Two weekends were not very strong, but this past weekend was OK.”
At Casual Corner, another moderate specialty chain with a checkered past, “Last weekend was sensational — in all regions of the country,” said Mark Shulman, chief operating officer. “We haven’t had a lull. We continue to do incredibly well with sweaters,” which are priced from $29 in cotton to $79 in cashmere. Shulman also cited leather jackets, averaging $179, and black evening dresses, $125, among the strong sellers.
“There is going to be a nice buildup into this weekend. Saturday and Sunday should be terrific,” Shulman projected. “And with the extra day this year, I think next week — Wednesday, Thursday and Friday — will be berserk.” This year, there are 29 days between Thanksgiving and Christmas, compared to 28 last year.
Shulman said Casual Corner is on plan this month, and that retailers should end up with 4 to 7 percent comparable-store gains for the season.
J.C. Penney Co. said sales last week were flat and on plan, with women’s apparel and accessories and family shoes leading the way.
At Gottschalks, the regional department store chain based in Fresno, Calif., “The weekend was pretty good. Our trend of business continues to be reasonably strong,” said Gary Gladding, executive vice president of merchandising.
Home continues to be the strongest category, particularly textiles, as well as children’s. Gladding also singled out Liz Claiborne and Tommy Hilfiger misses sportswear, juniors, intimates, robes and sleepwear. “I think we’ll end up with a sound, mid-to-high-single-digit comp for December,” he added.
Luxury stores seemed strongest. At Neiman Marcus, big ticket items such as precious jewelry, crystal and furs were bestsellers last week, said Karen Katz, executive vice president of stores. “We had an unbelievable week. It was great. We’re still pinching ourselves. Consumers are buying earlier than in the past. Hot items are bracelets, pashmina, resort fashion and Kate Spade accessories. Eveningwear has been really hot for the past eight weeks.”
Neiman’s threw parties last week for its In Circle consumers — those spending more than $100,000 this year at the 31-unit chain. But they may not have needed to encourage anyone to spend, with the economy and stock market robust.
“For us, business is holding up,” said Connie Finell, vice president and general merchandise manager, Mitchells of Westport, the Connecticut designer store. “We’re still selling fall, at regular price, as well as gifts, and a lot of evening dresses, which have really picked up. The coat business has picked up too, particularly shearlings. We’re also selling resort from Ralph Lauren, Calvin Klein, Donna Karan, Escada.
“All the big guys have resort in, and it’s selling.”
With retailing running healthy, “Christmas will not be as late as before,” predicted Isaac Lagnado, president of Tactical Retail, a consulting and research firm. “There will be less activity in the final week.”
That’s a big change from last year, when business dragged through December until a late surge enabled retailers to make their plans.
Lagnado also cited a “good balance” of business happening across the regions of the country, and said next weekend should be “huge.”
Last week, the National Retail Federation reported that consumers are shopping earlier this season, meaning less will storm the stores just prior to Christmas.
Tom Burns, senior executive vice president of The Doneger Group buying office, which serves major chains and mom-and-pop shops, did hear that some retailers were disappointed by a dip in sales last week and the week before. However, he agreed with other retailers that the shopping will certainly pick up in a couple of days. “The better end of specialty store business continues to be very strong; luxury items are strong. They have the look,” Burns observed.
He continued: “Discounters and mass merchants are meeting all expectations; regional department stores have the biggest challenge. They’ve experienced a peak-and-valley flow of sales in the last two weeks.” And the mom-and-pop shops are feeling the ups and downs as well, Burns added.
Wall Street analysts said Monday that sales accelerated in the second week of December — as did markdowns — and retailers are meeting holiday goals.
Lehman Brothers analyst Jeffrey M. Feiner said the holiday season is “better than good” for retailers, and apparel sales will continue to be lifted by colder weather. Although markdowns are abundant, much of the promotional activity was planned and not expected to hurt fourth-quarter margins, Feiner said.
“Stores bought well, and part of that is due to better management,” Feiner said at a Lehman’s luncheon Monday. He projected retail sales for general merchandisers should rise about 6.5 percent, and holiday profits for broadline retailers should rise between 12 and 14 percent. The apparel season should turn out “OK,” he said.
Salomon Smith Barney said although sales in the second week picked up “marginally” over the first week, it also saw increased promotions at broadline and specialty apparel chains. Combined with November’s slow start, Richard L. Church, broadlines analyst, said there was “limited upside potential” that retailers would be able to beat Wall Street’s fourth-quarter estimates.
“At this point, it’s a fight, but the quarter’s not over yet,” said Church on a conference call.
Church noted that the greater promotional activity last week primarily came from deeper coupon discounts — including between 15 to 20 percent off already reduced items — and early-bird special programs at Macy’s, Stern’s, May Department Stores and J.C. Penney. Maura Hunter Byrne, specialty apparel analyst, said specialty stores were on plan, but also cited more in-store promotions than last year at the group, mentioning Old Navy, Abercrombie & Fitch, Ann Taylor, Express, Victoria’s Secret Stores and Bath & Body Works. Banana Republic and Talbots were less promotional.
Salomon expects its broadlines same-store index to climb 4.8 percent in the fourth quarter, with discounters ahead 6.1 percent and department stores up 2 percent. Specialty apparel stores same-store index is expected to rise between 2 and 3 percent.
Some retail stocks rose Monday on the New York Stock Exchange. Among the biggest gainers were Wal-Mart, ahead 4 3/4 to 68; Tiffany & Co., 2 5/8 to 79 9/16 and Ames Department Stores, 1 3/4 to 27 3/4.
November and December sales for stores are forecast to grow to $173.2 billion from $168.8 billion in 1998, and e-commerce sales are forecast to rise to $12 billion from $4 billion, according to Feiner.
The “fly in the ointment” this season is e-commerce, which is expected to impact established retailers, Feiner said. E-commerce is still largely focused on commodities such as toys and books, with few traditional retail players expected to show significant e-commerce sales. But Feiner said some e-commerce providers are having difficulties fulfilling orders.
For 2000, Feiner said Y2K concerns have largely been addressed by retailers and will not be a major concern. The larger economic picture will remain mostly favorable, with a 6 percent increase in consumer spending forecast for the year.
Feiner’s favorite retail stocks heading into the new year are Wal-Mart, Costco, Dayton Hudson, Federated and Tiffany.
“Most people want to buy high growth companies, or sexy companies such as dot-coms, and Federated has both of those things together as well as strong management,” said Feiner. Federated is also expected to deliver strong earnings growth without significant sales growth as a result of better expense controls.
Among Salomon’s same-store forecasts in the fourth quarter: Wal-Mart, up 5 to 6 percent; Kmart, 4 to 5 percent; Federated, 2 to 3 percent; May, 1 to 2 percent; Sears, low-single digits, and Penney’s department stores, flat.
Among specialty stores, the top quarterly same-store gains are projected from Intimate Brands, 7 to 9 percent; Abercrombie & Fitch, 7 percent; Ann Taylor, 4 percent; Gap, 3 percent; Talbots, 7 percent; TJX, 2; Ross, 3 percent, and Limited, 2 percent.