Late Shoppers Spur Holiday Sales Volumes but Profits Remain Low
By Martin Stone

Procrastination paid off for many holiday shoppers this year with the last-minute discounts offered, but many retailers are left brooding over bottom lines.

Published holiday shopping figures indicate that most retailers suffered through a disappointing pre-Christmas season, but with bright spots in certain sectors and last-minute sales providing a boost to volumes, if not to profits.

News reports cited a healthy sales swell following Thanksgiving. The annual shopping spree started robustly Thanksgiving weekend, with sales increasing 7.6 percent over 2001, according to the International Council of Shopping Centers.

But sales slowed and remained lackluster in the days leading up to Christmas, forcing many stores to offer last-minute, deep discounts.

As a result, overall holiday retail sales fell 11 percent from year-ago levels, according to the tracking agency the National Retail Sales Estimate.

Because Thanksgiving was a later date this year, the holiday season was six days shorter than a year ago, which many analysts blame for the lower holiday sales in 2002. The National Retail Sales Estimate said that despite dynamic discounting throughout December, U.S. retail sales for the 26 shopping days between Thanksgiving and Christmas totaled $113.1 billion, compared to sales of $127.3 billion during last year's 32 shopping days.

A shopper from Brunswick, New York, reported to the Associated Press that he was rewarded for delaying his shopping, finding a $500 bracelet slashed by 50 percent. A shopper at the Empire Mall in Sioux Falls, South Dakota, also told the Associated Press, "I guess I am looking for more bargains than normal." He reported finding diamond jewelry discounted up to 50 percent.

Several reports indicated that shoppers delayed their gift buying more than usual, reluctant to spend due to worries about the economy, employment, and the world political situation.

The week before Christmas has become an increasingly critical sales period, according to C. Britt Beemer of America's Research Group. Last year it accounted for 34 percent of holiday sales, compared with 23.9 percent recorded in 1999.

Sears, Roebuck and Co. offered a 10 percent discount on almost everything on the Saturday morning before Christmas. Jewelry, gloves, and cold weather gear, as well as digital cameras, reportedly sold well.

But among the majors retailers, Target Corp. and J.C. Penney Co. Inc. reported that the longed-for sales tempo fizzled during the critical pre-Christmas week.

Federated Department Stores Inc., operators of Bloomingdale's, Macy's, and other stores, told reporters that sales in the week before Christmas, "did not strengthen as much as anticipated." The company warned that sales for November and December will likely be pegged below the previous estimate, which called for flat sales or a decline of 2.5 percent from 2001.

Christmas Eve day is not traditionally a big sales generator, accounting for about 4 percent of overall holiday sales. The International Council of Shopping Centers pegged Christmas Eve day as the seventh busiest holiday shopping day last year. But, according to an American Express retail index, 22 percent of buyers speculated they would finish their shopping on Christmas Eve 2002.

The National Retail Federation said average consumers had completed half their shopping as of the weekend before Christmas, but 30 percent had completed less than 10 percent. "The latest survey results indicate that Christmas has snuck up on many Americans this year," NRF president and CEO Tracy Mullin said.

The disappointing retail reports led analyst Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd., to lower his holiday forecasts. Niemira estimated that same-store sales for November and December combined will be up only 1.5 percent, down from his already reduced forecast of 2 percent.

Those figures reflect the weakest gain since 1970, he told the Associated Press, adding that last year, holiday same-store sales enjoyed a 2.1 percent increase over the prior year. Some market-watchers have called this season the worst Christmas for retailers in 32 years, with many stores reportedly entering the holiday season with lean inventories, hoping to avoid leftovers.

Analysts also point out that the deep discounting might take a significant toll on retailers' earnings. According to Kurt Barnard, president of Barnard's Retail Trend Report, "The heavy discounting is moving some merchandise but not enough that would be necessary to make up for the shortfall in gross margins." He estimated that profits will be about even with a year ago, at best. "The season is reflecting great spending caution and could be the weakest in a dozen years," he said.

For additional coverage of the holiday retail season, see the January/February issue of Colored Stone. Coming Soon: Colored Stone's Jewelry Retailer Survey results from 2002.

Posted: January 8, 2003