- The Washington Times - Friday, January 11, 2002

NEW YORK (AP) A surge of last-minute shopping helped save many retailers from a disastrous holiday sales performance, but the gains were the result of deep discounting that is expected to hurt fourth-quarter profits for some companies.
As the nation's largest retailers reported their December sales figures yesterday, it remained clear that the value-oriented chains, particularly Wal-Mart Stores Inc., TJX Cos., and Dollar General Corp., were again the big winners, achieving impressive gains of at least the high single digits.
And while department and apparel specialty stores including Federated Department Stores Inc., Limited Inc. and Gap Inc. again struggled, their sales declines weren't as steep as analysts expected.
"We knew that the month ended on a stronger note, but we didn't expect the surge to have such a broad-based effect," said Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd.
The results prompted retailers including Limited, Target Corp. and Sears, Roebuck and Co. to raise fourth-quarter earnings estimates. And Gap said its fourth-quarter loss will be narrower than what Wall Street expected, although analysts said they have yet to see any merchandising improvement at the company.
The positive news, which some retail observers saw as hinting at a consumer spending recovery, was tempered by an announcement from Kmart Corp., which said it won't meet analysts' earnings forecasts of 1 cent a share for fiscal 2001. The merchant said it was discussing financing with its lenders.
The long-struggling discounter reported a 1 percent decrease in sales at stores open at least a year, known as same-store sales, and has seen its market share eroded by Wal-Mart, Target and other rivals.
But for retailers overall, December was nowhere near the extreme disappointment so many analysts predicted.
The Bank of Tokyo-Mitsubishi's same-store sales index of 84 retailers registered a 2.3 percent gain in December, compared with a 0.7 percent gain a year ago. That is far better than the 1.5 percent increase Mr. Niemira had forecast.
Furthermore, the index's December reading appeared weaker than it really was because retailers including Federated, Kohl's Corp., May Department Stores, Target and AnnTaylor Stores Inc. were hurt from a quirk in the calendar.
These stores used a reporting period that excluded one week of holiday selling this year.
Still, the November-December period was difficult, the industry's worst holiday performance since 1995, when the Bank of Tokyo-Mitsubishi index recorded a 2.1 percent gain. Analysts had feared it would be the weakest Christmas season in at least a decade.
But "this may be a sign that the foundation of an upturn is at hand. It may suggest that we really hit bottom," Mr. Niemira said.
Mr. Niemira also was heartened by the latest economic report from the Labor Department, which revealed that the number of Americans filing new claims for unemployment benefits dropped during the first week of the new year.

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