To: Duke who wrote (27438 ) 12/10/1997 8:43:00 PM From: Glenn D. Rudolph Respond to
Canada retailers see best holiday sales in 3 years
Reuters Story - December 10, 1997 19:24
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By Lydia Zajc
TORONTO, Dec 10 (Reuters) - Large Canadian retailers are
toasting their best holiday sales in three years, but
aggressive department store promotions could end up squeezing
their bottom lines, industry officials said on Wednesday.
Job growth and low interest rates have encouraged Canadians
to dig into their wallets. But after two dismal holiday
seasons, Canada's big department stores, including Hudson's Bay
Co. and privately held Eaton's, are slashing prices
and extending promotions to boost crucial Christmas sales.
"The two department stores are having a slugfest," said
John Williams, retail consultant at J.C. Williams Group. "It's
a recipe for a blood-letting."
Bank of Montreal assistant chief economist Paul Ferley said
employment growth and low interest rates were lifting Canada
out of its retail slump.
"We're finally getting household income starting to pick up
and (that) should be coinciding with improving consumer
confidence. So I think we're going to see a better Christmas
sales period than we've seen since '94," Ferlye said.
So far in 1997, Canadian employment has jumped by 2.2
percent or 302,000 jobs, the biggest increase since 1994.
Meanwhile, interest rates have hovered near 40-year lows
despite three rate hikes this year by Canada's central bank.
Retail sales have risen 8 percent this year, for the
biggest gain since 1994.
But retailers' profits could be hurt by the battle between
the Bay, the department store unit of Hudson's Bay Co., and a
revitalized Eaton's, which emerged from bankruptcy protection
in late October after bleeding market share for years.
Hudson's Bay has warned investors that its margins could be
hurt by the fight. "We are expecting the positive trend in
retail sales to continue in the fourth quarter," said Chief
Executive Bill Fields, who added: "We expect the department
store segment to be particularly competitive and this could
negatively affect margins."
Eaton's spokesman John David Eaton said holiday sales had
improved due to promotions and a better merchandise mix.
Analysts said Eaton's must win back about C$500 million
($350 million) in sales from its rivals, which include Sears
Canada Inc , 61.1 percent owned by Chicago-based Sears,
Roebuck and Co..
Wood Gundy analyst David Brodie said that given stronger
sales, retailers could have sacrificed promotional activity to
strengthen their bottom lines.
"There's sort of no reason for it to happen this year,
given how strong demand has been," Brodie said. "Nonetheless,
nobody is leaving anything to chance and the consumers have
become now acclimatized to the idea of not buying anything
before Christmas unless there's a sale sign on it or unless
they really, really want it."
