- The Washington Times - Thursday, December 2, 2004

NEW YORK (AP) — The nation’s retailers had a disappointing start to the holiday season, reporting sluggish sales for November after a much hoped-for surge in Thanksgiving weekend business failed to materialize.

As merchants released their first solid results for the season yesterday, the downbeat reports came from across the sector, including Wal-Mart Stores Inc., Limited Brands, Federated Department Stores Inc., Gap Inc., and Bombay Co. Upscale retailers Nordstrom Inc. and Neiman Marcus Group Inc., which have consistently surpassed Wall Street’s projections over the past year, had strong gains but still were below estimates.

Among the exceptions were J.C. Penney Co. Inc. and Sears, Roebuck and Co., which beat Wall Street forecasts. Their business got a boost from strong sales over the Thanksgiving weekend, as these stores successfully wooed customers with bigger discounts and earlier store openings than a year ago.

But overall, the industry struggled through the month.

“This can’t bode well for the holiday season,” said Ken Perkins, an analyst at RetailMetrics Inc., a research firm based in Swampscott, Mass.

Consumers, particularly low- and middle-income Americans, have been forced to cut spending on clothing and other nonnecessities as gasoline prices and grocery bills rise. They are also nervous about jobs — on Tuesday, the Conference Board reported that doubts about the economy helped push consumer confidence down in November for a fourth consecutive month.

The International Council of Shopping Centers-UBS sales preliminary tally of 70 retailers increased 1.7 percent for November, lower than the reduced forecast of 2.5 percent to 3 percent range.

The tally is based on what the industry calls same-store sales, or sales at stores opened at least a year. They are considered the best indicator of a retailer’s performance.

Michael P. Niemira, chief economist at the shopping center group, said he was cutting his forecast for the November-December period to a 2.5 percent to 3 percent gain, from the original 2 percent to 4 percent projection.

The Washington, D.C.-based National Retail Federation said it was sticking with its forecast for a 4.5 percent gain in total retail sales, which exclude restaurant and auto sales. That would be less than the 5.1 percent gain of a year earlier. It’s pinning its hopes on last-minute shoppers.

“We think it is too soon to define the holiday season as a success or a disappointment,” said Ellen Tolley, a spokeswoman at the NRF. “The holiday season is going to be decided at the last minute, the week before and the week after Christmas” when shoppers do much of their buying.

Still, some of the nation’s retailers are not willing to wait. Wal-Mart — which acknowledged on Monday its weekend sales suffered because it had not discounted as heavily as its competitors — is rethinking its strategy for the rest of the holiday season. Bombay said it will step up price cutting, and Gap suggested yesterday it is considering the same.

John Morris, senior retail analysts at Harris Nesbitt, said these moves shouldn’t hurt profits because stores have relatively lean inventories. “It should be a healthy Christmas” in terms of profits, he said.

In other economic news yesterday, the number of new people signing up for unemployment benefits rose sharply last week but the overall level of applications still indicates a recovering job market. Furthermore, claims around Thanksgiving and other holidays are typically more volatile in part because of seasonal adjustment difficulties.

The Labor Department reported new filings for unemployment insurance increased by a seasonally adjusted 25,000 to 349,000 for the week ending Nov. 27, which included the Thanksgiving Day holiday. Some analysts expected a smaller rise — around 7,000.

Analysts were awaiting job figures from the Labor Department today.

Wal-Mart, the world’s largest retailer, reported a meager 0.7 percent increase in same-store sales. Wal-Mart’s results met Wall Street’s forecasts that were reduced earlier this week, after the discounter warned that its business the day after Thanksgiving was disappointing. Its total sales increased 8.7 percent.

But discount rival Target, whose cheap-chic merchandise appeals to both upscale and low-income consumers, had a 3.2 percent gain in same-store sales. The results matched Wall Street estimates. Total sales increased 9 percent.

Limited Brands had a 5 percent decline in same-store sales, far worse than the 4.8 percent increase Wall Street expected. Total sales declined 2.9 percent.

Gap Inc. posted a same-stores decline of 4 percent, below the 1.4 percent increase Wall Street forecast. Total sales were unchanged from a year ago.

Federated reported same-store sales fell 1.4 percent, far below the 1.2 percent gain Wall Street forecast. Total sales declined 1.6 percent.

“While we were encouraged by sales over the Thanksgiving weekend, it was not enough to offset the weakness in sales that we experienced earlier in the month,” he said.

May Department Stores Co. Inc. suffered a 7.7 percent decline, far worse than the 1.4 percent decrease that analysts had expected. Total sales were up 10 percent.

Among luxury retailers, Neiman Marcus had a 8.4 percent increase in same-store sales, slightly below the 9.8 analysts expected. Total sales rose 5 percent.

Nordstrom had a 3.1 percent gain in same-store sales in November, below the 5 percent forecast. Total sales rose 6.2 percent.

But Sears and Penney had results that pleased Wall Street.

Sears, which has been languishing in a sales slump and is merging with Kmart Holdings Corp., posted a 2.8 percent gain in its domestic business, much better than the 0.3 percent decline Wall Street expected.

Total sales increased 1.9 percent.

“We were pleased with our November sales results, especially our strong start to the holiday shopping season,” said Alan J. Lacy, chairman and chief executive officer, in a statement. “Despite sluggishness early in the month, we enjoyed particularly strong customer response to our enhanced promotional event and had record sales the day after Thanksgiving.”

Penney had a 12 percent increase in same-store sales for the month, slightly beating Wall Street projections for a 11 percent increase. Total sales increased 9.2 percent.

Bombay, which sells home accessories and furniture, posted a 13 percent drop in same-store sales, worse than the 5.8 percent decline forecast. Total sales fell 7 percent.

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