- The Washington Times - Friday, January 5, 2007

Deep discounts didn’t do enough to boost sales for retailers last month, ending their most important season on a sour note.

“December sales results were moderate, but were mixed by retailer and by segment,” said Michael Niemira, chief economist and director of research at the International Council of Shopping Centers (ICSC), a New York trade group. “More so than in past seasons, this holiday season came down to the week before Christmas as consumers waited to the last minute to complete their shopping.”

Overall, December sales at chain stores open at least one year rose 3.1 percent, beating the group’s 2.5 percent forecast, according to the ICSC.

During November and December, sales rose an average of 2.8 percent, compared with a 3.6 percent increase last year.

While sales rose slightly at many stores, they didn’t rise enough to meet Wall Street’s and the companies’ expectations.

Wal-Mart Stores Inc., the world’s largest retailer, bounced back from its sales dip in November to post a 1.6 percent increase last month. Sales at rival Target Stores Inc. rose 4.1 percent, just shy of expectations of 4.4 percent.

Apparel stores were hit hard by unseasonably warm weather in many parts of the country, analysts said, leaving racks of sweaters, coats, scarves and mittens untouched.

The worst performers included Gap Inc., where sales fell 8 percent, prompting the company to lower its profit forecast 18 percent from $1.01 to $1.06 per share to 83 to 87 cents. Ann Taylor Stores Corp.’s sales fell 5 percent.

Department stores, which have reached out to teens and fashion-conscious customers after years of losing sales to specialty stores, saw mixed results.

Sales jumped 11.1 percent at Saks and 9 percent at Nordstrom stores. J.C. Penney Department Stores and Kohl’s Corp. had slight increases of 2.6 and 3 percent, respectively. Sales fell 5 percent at Dillard’s Inc., a Southern chain, and 5.8 percent at Bon-Ton Stores, a Midwest chain.

Sales at Federated Department Stores Inc., the new owner of former Hecht’s stores and the owner of Macy’s stores, rose 4.4 percent, missing the 5.4 percent analysts expected, according to Retail Metrics in Swampscott, Mass.

Ken Perkins, president of Retail Metrics, said the subdued sales growth was surprising, given current economic indicators: high consumer confidence; warm weather, which kept home-heating prices low; and the retreat of gas prices.

But analysts also said consumers had less cash in their pockets because of a decline in mortgage equity withdrawals during the month.

While the season started out briskly on the day after Thanksgiving, sales quickly slowed as consumers put off their shopping.

“The season was marked by rampant procrastination, which led many retailers to discount heavily in the later weeks of December,” said Stacy Turnof, a Merrill Lynch research analyst, in a note to clients.

Even early in the season, Wal-Mart announced this would be its most promotional holiday, slashing prices on hot items all season in an attempt to drive sales. The moves prompted Target and other competitors to follow suit.

That cut margins, however, especially on high-profile items such as big-screen televisions. And retailers didn’t have a universal hot product this year, which has saved them in previous years.

“The lack of any must-have item was certainly another factor and the significant rise of gift card sales, basically pulling sales out of December and into January of this year,” Mr. Perkins said.

Sales from gift cards were expected to increase about 33 percent this year to $24.81 billion, according to the National Retail Federation. Those sales aren’t counted in retailers’ books until the card is used, meaning retailers could recoup those sales in January and beyond.

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