From NY TIMES ONLINE
Pick your lies.
December 28, 1998
Surge of Shopping in December Gives
Merchants a Lift
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Holiday Sales Are Disappointment to Retailers (Dec. 26)
By LESLIE KAUFMAN
Largely undistracted by the impeachment of President Clinton and the bombing of Iraq, U.S. shoppers appear to have spent freely from wallets that still feel pretty fat, giving retailers a muscular, if not stellar, holiday season.
Though industry figures will not be officially reported until early January, retail analysts and merchants themselves are predicting that December sales in big-chain stores open at least one year will rise for the second year in a row by as much as 4 percent to 5 percent.
This year's holiday shopping reflected generally buoyant consumer spending and an overall economic picture -- rebounding stock prices, low inflation and a tight job market -- that remains quite rosy.
"As long as consumers continue to get their daily fix from the stock market, they will continue to spend," said Stephen Roach, chief economist at Morgan Stanley Dean Witter & Co. "Nothing will stop them -- not impeachment, global turmoil or warm weather."
But they waited a while before rushing to the mall. Like Johnny Mathis carols and reruns of "It's a Wonderful Life," last-minute and post-Yuletide shopping are becoming something of an American Christmas tradition these days. In keeping with a trend of recent years, a larger portion of holiday sales came in the week just before Christmas and in the weekend right after.
"Once again, shoppers procrastinated until the last minute, waiting for the biggest bargains," said Bruce Van Kleeck, president of the National Retail Federation. This year, retailers had to "count on late shopping and after-holiday sales to be the savior," he said.
Department stores that cater to the middle price range felt the squeeze as customers split their dollars between high-end and low-end merchants. Sales at Sears, Roebuck & Co. and J.C. Penney Co. were expected to be flat, and once final figures are in, the entire sector is expected to show modest gains of just 1 percent to 2 percent.
Almost everyone else, however, appears to have done relatively well. Specialty apparel stores -- in particular Ann Taylor; Victoria's Secret, which is a unit of Intimate Brands; and The Gap chains, Banana Republic, Old Navy and The Gap itself -- sustained their strong performance by appealing to consumers with distinctive merchandise and effective ad campaigns.
These stores even lifted sales at regional shopping malls, which came up short of overall estimates last year, according to John Konarski, senior vice president of the International Council of Shopping Centers. The malls are expected to be in line with the sales-growth estimates of 4 percent to 4.5 percent, he said.
Discount chains like Target -- a division of Dayton Hudson Corp. -- and Wal-Mart Stores were the 800-pound gorillas of the season, catering to throngs of people determined to get their scented candles, George Foreman meat cookers, and Furbys at the lowest possible prices. Some 80 percent of Americans were expected to buy at least one holiday item from the discounters,up from 70 percent last year.
At the other end of the spectrum, luxury retailers basked in the stock-market comeback. Jewelry was particularly popular this year. In Jacksonville, Fla., Mike Alexander bought gold bracelets for his mother and sister because they already have "everything else."
Anything cashmere also had people cuddling up to the registers. At Baby Gap Luxe, a miniature bubble-gum-pink cardigan with matching pants, both made of the downy fabric, were racing out the door for a mere $155 a set.
Electronics retailers like Circuit City Stores Inc. and Best Buy Co. benefited from consumers snapping up personal computers, many of them now to be had for less than $1,000. And they enjoyed increased sales from new products that are starting to enter the mass market as prices drop. These include digital video cameras and DVD players, which use compact-disc-sized platters to play movies at home. They now are being sold for as little as $400.
Martha Stewart loomed as a presiding spirit this season as products relating to the home, from chenille throw pillows to leather easy chairs, were hot again. "We've moved past apparel as a Christmas item," Wendy Liebmann, president of WSL Retail, a consulting and consumer research firm, said. "Upscale consumers are saying, 'I don't need any more clothing.' In turning to the home,people are being both fashionable and practical."
Plenty of the gifts these stores sold, of course, were neither. At Restoration Hardware Inc., whose strong sales made it a leader in homewares, the seasonal standout was a silver-plated cocktail shaker shaped like a penguin, whose beak dispenses martinis.
Preholiday markdowns were just as fierce as in years past. Consumers have come to expect big discounts early in the season, and retailers delivered them earlier than ever. Signs enticing consumers to take 20 percent off were abundant around the country right after Thanksgiving, as were newspaper coupons. The cuts deepened with each passing week, particularly on cold-weather items.
The weekend before Christmas, the Bloomingdale's flagship store at 59th Street and Lexington Avenue in New York was decorated like the banquet hall in a medieval castle, with red banners hanging from the rafters proclaiming an extra 15 percent off, even on many items already marked down.
The good news, from the standpoint of the retailer's bottom line, is that many cuts were premeditated. Battle-hardened from years past, many merchants have finally accepted that the intense customer appetite for preseason sales cannot be wished away. Merle Goldstone, a spokesman for Macy's West in San Francisco,said, "We anticipated a very competitive environment, took it into account for our sales strategy, and are happy with the results."
Still, the diving prices were painful for some retailers to absorb, especially those who compete mostly on cost. "This year was an even more promotional year than last year," said Duncan Muir, a spokesman for J.C. Penney, "and that's going to hurt around the margins."
The Saturday before Christmas, which looks as if it will end up as the busiest shopping day of the year, collided directly with the House debate and vote to impeach Clinton. Shoppers and merchants alike agreed, a little shamefacedly, that the moment of high political drama had virtually no effect on people's efforts to complete their gift lists.
"Nobody's talked about anything but makeup all day. Isn't that scary?" said Joanie Kleinberg, who worked a Bobbi Brown cosmetics counter on impeachment day.
Asked if the historic events in Washington had affected her plans to spend the day hunting for gifts, Chris Schneider, a 45-year-old accountant from Denver loaded down with shower gels and lotions from Bath and Body Works, replied, "No, and that's sad, isn't it?"
For all retailers' hopes that the remarkably resilient economy would fuel a gangbuster season with 6 percent or even 7 percent gains, sales during the holiday season were nothing extraordinary, roughly in line with sales gains throughout the year.
Unseasonably warm weather for much of December can be blamed for depressing sales of winter apparel, but clearly that was not the whole story. Many analysts pointed to a realignment of buying priorities. "Consumers are still spending a lot," said Judy Tenzer, a spokeswoman for American Express Co., whose Retail Index tracks buying patterns. "They are just spreading it across a lot more activities, like travel and parties."
Also benefiting from shoppers' search to provide a more intimate gift than a sweater or bread machine was the spa business. Elizabeth Arden Red Door Salons, for example, said purchases of gift certificates for facials, body scrubs and the like are up 25 percent over last year.
Another warning sign, particularly for mall retailers, was the holiday success of online merchants. Even before Christmas, online stores had already racked up sales that match start-of-the-season predictions of $2.3 billion, double what they did last year. The question now, as the figures on online sales continue to be collected, is whether they will manage to go well beyond these expectations.
Macy's, a unit of Federated Department Stores Inc., reported that its World Wide Web site, launched in mid-November, was getting 10 million hits a day, far more than anticipated. Nordstrom Inc. also experienced an electronic rush. Anna Schryver, spokeswoman for Lands' End Inc., the mail-order apparel company, said that its Web traffic "had broken all records."
Being on the Internet, however, did not immunize Lands' End from pressures facing other apparel merchants. The company, which has been troubled lately and recently booted its chief executive, started marking prices down even before the holiday season to attract the growing number of consumers who will not lay down money until they see a bargain.
And while shopping on the Web remains a tiny fraction of the estimated $174 billion in retail sales for the holiday season, that did not stop Internet merchants from gloating.
Amazon.com Inc., the cyberspace book-selling powerhouse, would not release precise numbers, but said visitors to its Web site on the day after Thanksgiving quadrupled from last year. "1998 goes down in history," Bill Gross, a company spokesman, said, "as the year the Internet became a mainstream alternative." |
