Tell me lies ,tell me sweet little lies..
December 25, 2001
BUSINESS
Desperation Sales Fail to Lure Shoppers
By LESLIE KAUFMAN
The holiday shopping season opened the day after Thanksgiving with nervous merchants cutting prices 40 percent. It ended over the final weekend before Christmas with a frenzy of desperation sales with as much as 70 percent off that failed to save the season for most retailers.
Rather than generating lots of last-minute traffic, deep sales were the minimum ante retailers had to offer merely to attract the attention of jaded customers in a dismal recession-bound economy. Bargain hunting along Chicago's Miracle Mile on Sunday north of downtown, Mary Beth Patterson summed up the sentiment succinctly: "We are trying to get 30 to 50 percent off on everything we buy. And it's working."
Before Thanksgiving, industry analysts had hoped that nonautomobile retail sales might grow at least 2 to 3 percent. But warm weather, the economic downturn and general malaise after the Sept. 11 attacks combined to suck the spending spirits out of the holiday. Zero-percent financing deals from Detroit's automakers also siphoned off many of the extra dollars consumers might have taken to the malls.
Final sales and traffic for this last weekend will not be reported by most retailers until tomorrow. Yet reports from the field and scattered evidence from various merchants indicate that the crowds, while dense in certain places, were too light to offer any last-minute miracles on 34th Street or anywhere else. Economists, analysts and retail consultants now generally agree that retail sales, outside the auto sector, are not likely to increase much more than 1 percent or so for November and December.
In short, it was a long, bitter season.
"It was the worst Christmas" in a decade, lamented Jeffrey Feiner, a retail analyst with Lehman Brothers (news/quote) who follows the retailing sector. Mr. Feiner said that profit margins, already thin, could be down by as much as 10 percent across the industry.
"Retailers lowered their expectations," he said, "but when all things are added up, it will still be worse than that."
Products that encompassed the values of home — everything from high-technology entertainment systems to old-fashioned board games — fared the best. With a little extra cash in their wallets from skipping vacations, consumers spent big on cheap DVD players, expensive big- screen televisions, and video game consoles for their children and digital cameras for themselves. Sales of home-theater systems nearly doubled in the first weekend after Thanksgiving, compared with the comparable period last year, and then stayed consistently strong, according to a survey by NPDTechworld, a market information company.
But with much of the country experiencing temperatures this month resembling a brisk March rather than a blustery and snowy pre-Christmas, winter apparel sold particularly poorly. "I don't see how the apparel companies could be anything but down 3 to 5 percent," said John D. Morris, an analyst with Gerard Klauer Mattison.
With sales at the height of the shopping season so tepid despite near give-away prices, several economists suggested that consumers may be even more reluctant to spend early next year.
"It is taking extraordinary measure of near desperation to keep consumers afloat," said Stephen S. Roach, chief economist for Morgan Stanley. "The question now is how much of what we are seeing now is borrowed from gains that would have come next year."
Considering how cheap things are already, it seems hard to imagine that steeper price cuts are still to come, but the nation's merchants still have plenty of goods on their racks and shelves to unload. That suggests that retailers will cut prices even more after Christmas.
"Merchandise is not like a Merlot," said Michael Gould, chairman and chief executive of Bloomingdale's, a division of Federated Department Stores (news/quote). "It is not going to get better with time."
Mr. Gould said Federated would offer its usual post-Christmas sales, but further price cuts would come on items that had been only partially discounted so far. Men's cashmere sweaters, for example, which started the season at $198 and sold for $129 the day before Christmas will be $89 tomorrow.
And if they do not sell even then? "Oh, at $89 we will have a riot," Mr. Gould predicted.
But even before the last discounts are taken and the inventory cleared out, it is clear that the spending torpor has taken a toll on the industry. Last Friday, Moody's Investors Service downgraded Kmart (news/quote)'s debt to junk status. The discount retailer has had trouble meeting modest sales targets despite extended hours and ferocious price cuts — like 70 percent off its gold and diamond jewelry.
Moody's (news/quote) also downgraded the outlook for the Limited, parent company of Express, and is reviewing Gap's credit. Gap, which also operates the Banana Republic and Old Navy chains, has suffered a devastating season. Just to clear unwanted sweaters, pants, and underwear, Gap's lineup of retailers has put an unprecedented amount of merchandise on sale. Even seasonal items like thigh-length hand-knit sweaters were marked down to $34.99 from $98.
The Gap's downfall has been the most spectacular of the season, but mall-based specialty clothing stores were hit hard across the board as the cathedrals of consumption did not seem to draw the usual immense crowds on the last weekend before Christmas, which has replaced the weekend after Thanksgiving as the busiest shopping burst of the year.
"Traffic was a bit off on Saturday," said Karen MacDonald, a spokeswoman for the Taubman Group, which runs 31 malls in 13 states, "although it rebounded on Sunday."
And despite an extra day of shopping when many people extended weekend breaks right through Christmas Day, malls seemed particularly empty yesterday. While shoppers reveled in the discounts, most said the price cuts were still not enticing enough to persuade them to spend more than last year.
"I am spending the same, but getting more and enjoying it more," said Barbara Kahn-Velez, who was getting in some last-minute bargain hunting Sunday on New York's Fifth Avenue.
"At Macy's it was like take 20 percent off something that was 40 percent off and take 15 percent more if you have your credit card," Ms. Kahn-Velez joked.
There were a few winners in this season of woe. The nation's biggest retailer by far, Wal-Mart Stores (news/quote), reported yesterday that sales though Dec. 21 were up 4 percent over last year, a solid increase. Target said that its sales through Sunday were up more than expected.
Target did not say which was the biggest shopping day for the chain, but Dave Johnson, general manager of a Target store in Charlotte, N.C., said this year's sales on the last Friday night before Christmas were up 28 percent from the corresponding day last year. He said the store sold hundreds of George Foreman grills this year, along with electronic games like the Xbox and Nintendo (news/quote) GameCube. Harry Potter merchandise and "Lord of the Rings" books also have been hot, Mr. Johnson said.
Another bright spot for some retailers was the Web. Holiday purchases over the Internet — focused on items like digital cameras — grew 34 percent over last year, according to Bizrate.com. While that gain was substantial, Internet sales, at roughly $6.3 billion, are just a tiny piece of the overall Christmas retail pie.
Of course, the real winners in this holiday were consumers like Lisa Macias from Milwaukee, who was loaded up with merchandise from F.A.O. Schwarz, H20 and Gap this weekend.
"Every place it is sale, sale sale," she said. "That's the way I like to shop." |
