Shoppers Take a Holiday
By TRACIE ROZHON
The country's largest retailers reported September sales so dismal that they were only slightly better than sales a year before, when many shoppers stayed away from stores after the Sept. 11 terrorist attacks.
The results reported yesterday further worried an industry looking warily toward a holiday shopping season, with consumers already troubled by a falling stock market, weak job prospects and the possibility of a war with Iraq.
"Christmas is looking bleak," said Ben Johnson, the editor of Shopping Center World, a trade newsletter published by Primedia. "Back-to-school was disappointing to say the least, and now the September figures show the darlings like Target and Kohl's are down. They were like the rocks."
Sales at stores open at least a year were up just 1.2 percent from last September, according to the Goldman, Sachs retail composite measure. Discounters were up 3.1 percent, while department stores were down 3 percent.
One analyst after another sounded like Scrooge, pointing to evidence that retailers have already begun to expect the worst through the end of the year. Some Christmas decorations are already on sale, for example, and blue jeans, once best sellers, are being marked down in many places, they said.
Worst of all, no runaway toy success is in sight, the kind of must-have product that leads to televised tales of long lines or encourages parents to pay scalpers to to find that perfect gift for their children. "There's no Razor scooter or Furby or Cabbage Patch coming out," said Russell Jones, vice president for retail consulting at Cap Gemini Ernst & Young.
The holiday season, when the toy industry in particular generates a big portion of its sales, is now "a big question mark," said Thomas P. Conley, president of the Toy Industry Association, even though earlier this year the industry had predicted a 4 to 6 percent increase from last year.
More broadly, while many retail experts blamed the softening economy in general, Britt Beemer, chairman of America's Research, said a lot of consumers were just plain bored with the merchandise.
"Seventy-three percent of those surveyed said there was no real difference between Store A and Store B," he said.
One reason for the weak showing at shopping malls is that many consumers may be tapped out from buying big items like cars and houses.
The September results were particularly disappointing because many experts had thought the month would be an easy big score because of the comparison with the dismal results the previous September.
Now, despite an economy that is no longer in recession, many analysts are saying the gains for the holiday shopping season may turn out to be lower than last year's.
Michael Niemira, an economist with the Bank of Toyko Mitsubishi, said the risks for retail — sales and earnings — are "all on the downside." He listed two possibilities: "If by some miracle, the war tensions wane, the best you'll do is a 3.75 percent rise over last year," he said; but if a war breaks out in Iraq before the end of the year and there are consequences like higher oil prices, he said, holiday sales figures could be gruesome.
"Given what we've seen in the last two months, it's an absolutely pessimistic picture," Mr. Niemira said. The economist mentioned a particularly alarming survey of retail executives done by the National Retail Federation. `'The September numbers make it even worse," he said.
By the 79-store index compiled by Mr. Niemira's Bank of Tokyo-Mitsubishi, sales at chain stores in September rose about 1.5 percent — compared with 0.9 percent a year ago. It was the smallest gain reported since the attacks. The department stores did the worst, with apparel sellers second.
Even some never-fail favorites of shoppers have stumbled. Sales at store opened al least a year at Kohl's, for example, dropped 3.2 percent after a year of double-digit increases.
Similar sales at J. C. Penney, which rose 8.1 percent in September 2001, fell 3.1 percent last month. Target, another success story, fell slightly. Wal-Mart Stores, the country's largest retailer, rose 3.3 percent, but that was well below the company's initial projections, and at the low end of its revised estimates.
There were a handful of sunny stories, but they were rare amid the general gloom. The Limited gained 6 percent, and Neiman Marcus was up 18.7 percent.
Todd D. Slater, who covers the retail industry for Lazard, said long-term averages continued to deteriorate. "Mall traffic is way off," he said.
What of September's hot weather, which several stores blamed for the poor showing of autumn and winter wools?
"Don't blame the weather," said Mr. Slater, who produced charts to show the temperatures from New York to Los Angeles were, on average, only 1 to 3 percent higher than in September 2001.
According to Chuck Hill, director of research for Thomson First Call, 9 of 18 apparel companies have now warned that they will miss their earlier estimates for the third quarter. Many had already been revised downward.
Because of the weak September numbers, some retailers are reconsidering their fourth-quarter projections. Yesterday afternoon, Gap, which has been on a long downward trend, projected that per-share earnings for the fourth quarter would be 2 to 7 cents below earlier expectations, largely because of the extra transportation rerouting expenses and the lost sales connected with the West Coast port shutdown. B. J.'s Wholesale Club also predicted earnings for the fourth quarter would be less than originally expected.
Many of the worst showings were at companies that specialize in apparel for teenagers — only a while ago the great hope of the clothing business. But yesterday's numbers for Abercrombie & Fitch, American Eagle Outfitters and Wet Seal were dispiriting.
Still, some analysts, pointing to the fact that American Eagle's shares were up yesterday, said the worst might be over for some retailers.
"The fact the stock goes up on bad numbers indicates that we're close to the bottom," Mr. Slater said. "Because the bad news is not as bad as the stock prices."
Lazard is taking a neutral stance on buying retail stocks. Mr. Slater, who predicted yesterday that November "could get pretty ugly," said that then might be the time to buy. "The only time to buy is when you're in the belly, suffering the max pain," he said.
Despite the dim outlook, a few special items sparked interest among those affluent buyers who have not suffered too much from the decline in stocks.
"We mailed our Christmas catalog in early September," said Bob Friedland, a spokesman for F. A. O. Schwarz. "And some of the things are already sold out."
What's sold out?
"Several one-of-a-kind things," Mr. Friedland said. "Two of our one-of-a-kind Barbies, for $8,000 apiece, have gone."
But that's only two dolls.
"It's really too early to tell," he replied. `'We'll know more after Thanksgiving."
nytimes.com |
