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Retailers Report Modest Sales Gains
NEW YORK, Nov 30, 2000 (AP Online via COMTEX) -- The outlook for the holiday shopping season grew more uncertain Thursday after the nation's largest retailers reported modest November sales gains that were achieved only by heavy discounting over the Thanksgiving weekend.
While some stores did well, especially value-oriented chains like Wal-Mart Stores Inc. and Kohl's Corp., many retailers, continuing a trend that is now several months old, fell victim to slowing consumer spending. Several stores, including Gap Inc. and AnnTaylor Stores Corp., warned that holiday sales were likely to be disappointing.
"The season started out tough, and it will continue to be tough. You are getting so many negatives from the economic side," said Michael P. Niemira, vice president of the Bank of Tokyo-Mitsubishi Ltd., who forecast a moderate 4 percent gain for the overall industry during the holiday season.
The Bank of Tokyo-Misubishi retail sales index, which tracks sales at about 80 store chains, rose 3.4 percent last month from November 1999, when the index increased 4.1 percent. From January through November, the index rose 4.6 percent, compared with 6.7 percent in the same period last year.
A slowing economy, stock market volatility and rising fuel prices have prompted consumers to spend more cautiously, which in turn has forced merchants to discount merchandise earlier than usual for the holiday season.
And industry analysts predict retailers will be making even deeper price cuts over the next week because merchants are nervous amid a drop-off in customer traffic since the Thanksgiving weekend. Although many stores were upbeat about sales last Friday, store and mall traffic began to taper off on Saturday.
"It's been deadsville at the malls. It's very unsettling," said Kurt Barnard, publisher of Barnard Retail Trend Report, based in Upper Montclair, N.J.
Deeper discounts pose a big threat to retailers' earnings - while stores may lure more customers with lower prices, merchants make less profit on each item that is marked down.
Two new economic reports - one on personal income, the other on consumer confidence - did not bode well for the holiday season.
On Wednesday, the Conference Board reported consumer confidence fell in November to its lowest level in more than a year. And Thursday, The Commerce Department reported Americans' personal income declined by 0.2 percent in October, the first decrease in two years. Consumer spending, meanwhile, rose by the smallest amount in six months.
Making the holiday season more difficult is the lack of must-have items across many categories from toys to apparel.
Many department stores continued their sluggish pace, hurt by weakness in apparel. Clothing sales had shown some signs of improvement over the past two months, but appeared to soften in November despite a cold snap, analysts said.
Many of the stores, including Sears, Roebuck and Co., Saks Inc., May Department Stores Co., and J.C. Penney Co. Inc. were able through heavy discounting to eke out modest sales gains that met Wall Street expectations. Dillard Inc., had a 1 percent decline in same-store sales, or those open at least a year. That was in line with Wall Street's reduced forecasts.
"Apparel is still not selling well," said Daniel Barry, an analyst at Merrill Lynch & Co.
Federated Department Stores Inc., which on Monday reported a same-store sales gain of 1.4 percent, came in below analysts' projections.
The difficult environment prompted several retailers, including AnnTaylor Stores Corp. and Gap Inc. to issue warnings about their holiday business over the past week.
AnnTaylor reported same-store sales fell 2.9 percent, and warned that fourth-quarter sales could also drop. The company's stock dropped $8.69, or 29 percent, closing at $20.75 a share Thursday on the New York Stock Exchange.
Gap announced Wednesday a slim 1 percent same-store sales decline for November, warning that further discounting posed a risk to its earnings.
Meanwhile, shares of trendy apparel retailer Abercrombie & Fitch fell $7.31, or nearly 26 percent, to $20.88 after the company reported same-store sales declined 8 percent.
The winners in November were value-oriented chains such as Kohl's and Target Corp. as well as discounters including Wal-Mart. Bruised by higher fuel prices, they seemed to have made a comeback, taking market share away from specialty retailers like Best Buy Inc. in such categories as home appliances, analysts said.
Kohl's had an 11.2 percent increase in November same-store sales, easily beating Wall Street's expectations.
Big winners among specialty apparel retailers included Talbots Inc., Pacific Sunwear of California Inc., American Eagle and Hot Topic, Inc., all of which reported strong November results.
Talbots had a same-store increase of 21.9 percent, and according to Arnold B. Zetcher, chairman, president and chief executive officer, sales were achieved without promotions.
By ANNE D'INNOCENZIO AP Business Writer
Copyright 2000 Associated Press, All rights reserved
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