Taxes
An uneven season holiday shopping season
08:15 AM EST on Friday, January 5, 2007
The holidays were a mixed bag for the nation’s retailers, with many yesterday releasing lackluster sales reports.
They showed that few companies were outright winners during the holidays as consumers raided stores for discounted electronics early in the season, then shouldered past winter-weather gear as warm temperatures gave them a reason to put off some purchases.
The Providence Journal / John Freidah
Shoppers make their last push for Christmas gifts at Providence Place mall. Warm weather dampened apparel sales, while consumers flocked to stores early in the season for discounted electronics.
As expected, online retail sales and gift-card purchases continued to grow, throwing off financial measures.
“There were some pockets of strength and those pockets seemed to provide more of a lift than we had anticipated,” said Michael Niemira, chief economist at the International Council of Shopping Centers. “One thing that really is clear — it was quite uneven.”
Retail chains Federated Department Stores Inc., Gap Inc., Hot Topic Inc., Limited Brands Inc. and Target Corp. all posted sales that were less than predicted. Gap, BJ’s Wholesale Club Inc. and AnnTaylor Stores Corp. cut their profit outlooks.
Wholesalers Costco and Sam’s Club did well, as did upscale department store Nordstrom Inc.
Shoppers kicked off the holidays after Thanksgiving briskly, snapping up electronics as prices for flat-panel televisions plunged and video-game makers Sony and Nintendo introduced new systems. Discounts on TVs, digital cameras and MP3 players propelled sales.
Consumer electronics sales from the day after Thanksgiving to the week ended Dec. 23 were $8.75 billion — up 6.5 percent from a year ago, according to NPD Group in New York. (Electronics retailers Best Buy Co. Inc. and Circuit City Stores Inc. report quarterly sales today.) According to the National Retail Federation, retail industry sales for November (which exclude automobiles, gas stations and restaurants) rose 6.3 percent unadjusted over last year and increased 0.9 percent seasonally adjusted from October. When the final tallies are in, the NRF predicts that holiday shopping will hit $457.4 billion, up 5 percent from last year.
But the demand for expensive video-game systems, digital TVs and the like may have contributed to weak apparel sales.
And warm weather didn’t help either. Last month was the warmest December in five years.
“What we heard from most retailers was the apparel just didn’t do well until the weather turned colder,” said Stephanie Hoff, a senior analyst at investment firm Edward Jones in St. Louis. “Generally speaking, there was probably more promotion on apparel than retailers had planned.”
Still, she said, performance at most of the retail companies she follows was “right on plan.”
Sales from stores open at least a year — known as same-store sales — are the traditional benchmark for retail performance. Those numbers aren’t giving the full measure of sales because online buying isn’t included.
Online sales totaled $102.1 billion last year, with $24.6 billion of that coming in the last two months of the year.
“2006 was certainly an exceptional year for online retailers as e-commerce spending eclipsed $100 billion for the first time,” said Gian Fulgoni, chairman of comScore Networks Inc., a Reston, Va., firm that analyzes consumer behavior.
Gift-card sales are booked only when the recipients redeem them for gifts, stretching holiday-related spending into this month. About 40 percent of gift-card redemptions occur in January while only about 10 percent to 15 percent occur in the last week of December, said Niemira, the economist.
“Surprisingly . . . the gift card was more of a factor in [people’s] willingness to shop late,” he said. “January is a holiday sales month as well.”
For this year, Niemira predicts retail sales growth will slow as sales in varied sectors converge around 3 percent.
“Housing will continue to have an effect on retail sales,” he said, noting the slowdown that has plagued the residential sector.
Pending house sales dropped 0.5 percent in November, according to the National Association of Realtors.
But the jobs sector is generally good, with wages ticking up and employment cuts dropping last year, analysts noted.
“Even as the economy slowed in the last half of the year due to weakness in the housing market, we did not see the typical spike in fourth-quarter job cuts,” said John A. Challenger, chief executive officer at Challenger, Gray & Christmas, a New York-based outplacement agency.
Planned job reductions were near 840,000 last year, about 230,000 fewer than in 2005, according to the agency. It was the first time since 2000 that annual job-cut announcements fell below 1 million.
Still, the number of laid-off workers filing claims for unemployment benefits rose last week, according to a Labor Department report. The federal agency reported that 329,000 newly unemployed workers filed applications, 10,000 more than the previous week.
Employers have held onto workers to retain “bench strength” as they still see room for growth, Challenger said.
“[Business owners] may be too optimistic,” he said.
Further fallout from the housing sector could derail the wider economy, he said.
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