[NYTr] Not Buying It: More on the "Disappointing" Silly Season for Retailers

[All the News That Doesn't Fit]

The New York Times - Dec 25, 2007
http://www.nytimes.com/2007/12/26/business/26shop-web.html

Disappointing Sales During Holiday Season

By MICHAEL BARBARO

American consumers, uneasy about the economy and unimpressed by the
merchandise in stores, delivered the bleak holiday shopping season
retailers had expected, if not feared, according to one early but
influential projection.

Spending between Thanksgiving and Christmas rose just 3.6 percent over
last year, the weakest performance in at least four years, according to
MasterCard Advisors, a division of the credit card company. By
comparison, sales grew 6.6 percent in 2006, and 8 percent in 2005.

“There was not a recipe for a pick up in sales growth,” said Michael
McNamara, vice president of research and analysis at MasterCard
Advisors, citing higher gas prices, a slowing housing market and a
tight credit market.

Strong demand at the start of the season for a handful of must-have
electronics, like digital frames and portable GPS navigation systems
trailed off in December. And robust sales of luxury products could not
make up for sluggish sales of jewelry and women’s clothing.

What did eventually sell was generally marked down — once, if not twice
— which could hurt retailers’ profits in the final three months of
year. “Stores are buying those sales at a cost,” said Sherif Mityas, a
partner at the consulting firm A.T. Kearney, who specializes in
retailing.

MasterCard’s SpendingPulse data, scheduled to be released Wednesday,
cover the 32-day period between Nov. 23 and Dec. 24. It is based on
purchases made by more than 300 million MasterCard debit and credit
card users and broader estimates of spending with cash and checks. It
encompasses sales at stores, on the Internet, of gift cards, gasoline
and meals at restaurants.

The final numbers are in line with MasterCard’s already modest
expectations, which were reduced in the middle of the season. But
retail analysts and economists, who scrutinize holiday spending for
clues about the health of the American economy, are unlikely to be
impressed by the results.

Eboni Jones, 32, of Windsor, Conn., epitomized the problem for stores.

A phone company manager, she waited until this past weekend to make a
single purchase at a major chain store this season, favoring Web
retailers and designer outlet stores with deeper bargains.

“I am on a tighter budget that I’ve ever been,” said Ms. Jones, who
walked into the Macy’s at Westfarms Mall in Farmington, Conn., on
Sunday morning to take advantage of a sale.

In the past, she easily spent $100 each on her six nieces and nephews.
This year, it was more like $50. “If it’s not on sale, I won’t buy it,”
Ms. Jones said.

MasterCard found that online spending rose 22.4 percent, a healthy, if
not robust, showing, given fears that Web purchases would slow after a
decade of impressive growth.

Clothing sales rose a meager 1.4 percent, but there was a stark split
between genders. Sales for women’s apparel dropped 2.4 percent. Sales
for men’s apparel rose 2.3 percent. Analysts said women complained of
dreary fashions.

“Even when the dust settles, women’s clothing is likely to be one of
the weakest categories in retail this season,” said John D. Morris,
senior retail analyst at Wachovia Securities.

Luxury purchases rose 7.1 percent, as the nation’s well-heeled splurged
on $600 Marc Jacobs trench coats and $800 Christian Louboutin shoes.
Footwear, at all prices, proved a bright spot for the clothing
industry, with sales surging 6 percent.

Weak sales of clothing left retailers jostling for the deepest if not
most desperate discounts over the last weekend to drum up interest from
consumers. Martin & Osa knocked 50 percent off women’s wool sweaters.
Gymboree issued $25 coupons to shoppers who spent $50 on its children’s
clothing. Even the markdown-averse Abercrombie & Fitch dusted off its
clearance signs, selling $99 faux-fur trimmed-down coats for $79.

The American consumer has perplexed analysts this season. Retail
experts confidently predicted that shoppers, uneasy about the economy,
would trade down from mid-price chains, like Macy’s and Nordstrom, to
discounters with steeper discounts.

To a certain degree, they did, mobbing low-priced chains like T.J Maxx,
and Marshall’s. But the discount retailer Target has struggled this
season. On Tuesday, it said its sales could fall by 1 percent in
December compared with last year, an anomaly for a retailer accustomed
to at least 4 percent monthly sales growth over the last three years.

In the end, analysts said, the biggest winners are likely to be
Wal-Mart, which emerged as the undisputed low-price leader this season,
and Best Buy, which became the destination for competitively priced
electronics.

Much of this season’s action appeared to unfold on the Web, which
spared consumers a $3-a-gallon drive to the mall. Like MasterCard,
ComScore, a research firm, found that online spending rose steadily to
$26.3 billion.

ComScore measured spending during the 51 days between Nov. 1 and Dec.
21. The biggest day for online shopping was Monday, Dec. 10 ($881
million), not the Monday after Thanksgiving ($733 million), known as
Cyber Monday in the retail world, because consumers typically flock to
the Web at work after a holiday weekend of browsing.

Unsatisfied with sales so far, dozens of retailers, from the high-end
to the low, will start slashing prices Wednesday morning. Kohl’s is
scheduled to hold a 60- to 70-percent off sale; Macy’s is knocking down
prices by 50 to 70 percent, and dangling a $10 coupon for purchases of
$25 or more; clothing will be 50 percent off at Saks Fifth Avenue
between 8 a.m. and noon; and Toys “R” Us is offering a
buy-one-get-one-half-off promotion.