Christmas Sales Fail to Save Chain Stores
By Pedro Nicolaci da Costa
NEW YORK (Reuters) - Heavy discounting and Christmas promotions boosted sales at U.S. chain stores last week, but not enough to offset a dismal month of December for retailers, two reports suggested on Wednesday.
Analysts are paying close attention to holiday sales results this year, hoping that consumers -- whose spending accounts for two-thirds of the nation's economic activity -- can jump-start
the recession-mired U.S. economy.
U.S. chain stores rose 0.9 percent in the week ended Dec. 29, the Bank of Tokyo-Mitsubishi said, after a 2.9 percent rise one week earlier. Consumers eager to capitalize on post-Christmas discounts crowded stores, and cold weather fueled sales of winter clothing.
But overall sales for the month of December proved disappointing, despite a small uptick in sales during the Christmas week.
``This has been a pretty mediocre holiday shopping season,'' said Steven Wood, chief economist at FinancialOxygen in Walnut Creek, California.
BTM projects around a 1 percent rise in same-store sales for December, better than last December's 0.7 percent rise, but much lower than in 1999, when December sales soared 6.7 percent.
In a separate report, Instinet's Redbook Average showed a 3.9 percent drop in sales during the four weeks to Dec. 29 compared with the same period in November.
``Despite the fact that consumers are saving a lot of money on their energy bills, they've not shifted all of that additional purchasing power toward other goods,'' said Christopher Low, chief economist at First Tennessee Capital Markets.
Low was referring to a recent drop in energy prices that analysts hoped would drive Americans to channel some of their savings on gasoline and home heating oil into holiday spending.
WORST HOLIDAY IN RECENT MEMORY
Although December was a five-week month for retailers, with one week's data still pending, analysts are not optimistic as they finalize their estimates for same-store holiday sales.
Some have predicted 2001 was one of the worst holiday seasons in a decade. According to the U.S. Commerce Department, the worst recent holiday season retail performance occurred in 1990, when sales were flat.
Mike Niemira, senior economist at BTM, said 2001 looks set to post the worst performance recorded in BTM's survey, which dates back to 1979. He forecasts a 1.5 percent rise in overall holiday sales, compared with a 2.4 percent rise in 2000, and a 5.4 percent jump in 1999.
Check acceptance firm Telecheck Services Inc. said last week its data showed same-store sales rose a modest 2.2 percent during the 32 days following the Thanksgiving holiday.
First Tennessee's Low said he expects overall sales to fall in the lower end of most analysts' zero to 2 percent range of expectations for growth in December.
In line with recent trends, discounters outperformed department stores during the holidays, even though apparel sales got a welcome lift from cooler temperatures in the latest week.
``Consumers are still spending, but they're being much more cautious,'' Financial Oxygen's Wood said. ``They're looking for real bargains.''
Federated Department Stores Inc.(NYSE:FD - news), parent of the Macy's and Bloomingdale's chains, said on Monday it expects a drop between 9 percent and 9.5 percent in December sales, less than the 11 percent to 14 percent range estimated earlier, but a considerable falloff nonetheless.
In contrast, Wal-Mart stores(NYSE:WMT - news) reported last week that it expected holiday sales to reach the high end of an estimated rise between 4 percent and 6 percent.
SLOW RECOVERY IN STORE
If an economic rebound rests on the shoulders of the American consumer, then recovery could take a while.
Analysts noted that retailers' heavy discounting is only sustainable for so long, before it dents profits.
When discounting finally does subside, ``You'll see consumer spending take a pause,'' said Wood.
BTM said year-over-year sales in the week ended Dec. 29 rose 1.5 percent, while Instinet recorded a 2.6 percent year-on-year sales growth.
The BTM/UBSW Weekly Chain Store Sales Snapshot is compiled from seven major discount, department and chain stores across the country that report their weekly results, including J.C. Penney (NYSE:JCP - news), Sears(NYSE:S - news), Target(NYSE:TGT - news), Kmart(NYSE:KM - news), Wal-Mart, Federated Department Stores Inc. and May Department Stores Co. (NYSE:MAY - news)
The Redbook Retail Sales Average is a sales-weighted average of annual growth in same-store sales at discount, department and chain stores. It is released weekly by Instinet Research, a division of Instinet, an electronic brokerage owned by the Reuters Group Plc(quote from Yahoo! UK & Ireland: RTR.L).
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