Retailers see lower sales
|
|
January 2, 2001: 5:30 p.m. ET
Forecasts call for lower December sales; economy, weather blamed
|
NEW YORK (CNNfn) - The weather outside is frightful, and frankly, so were retailers' holiday seasons.
Despite a last-minute rush for holiday gifts and items, many retailers expect December sales to fall short of forecasts, evidence that the slowing economy has significantly slowed consumer spending.
Many of the biggest U.S. chains and department stores report December sales figures Thursday, and while sales are actually up, the rate of sales growth was much smaller than last year's phenomenal numbers.
That combined with deep discounts and heavy promotions, are also expected to eat into retailers' fourth-quarter profits, a time when merchants typically do more than half of their year's business.
Higher interest rates that cooled the economy and high fuel prices caused consumers to scale back purchases this year. Add to the mix severe weather in parts of the country that kept people away from the malls and the shops, and you've got all the makings of a lean season.
Consumers raced to the stores the day after Thanksgiving, taking advantage of big sales, but the pace quickly slackened, with a big lull in sales lasting until the week before Christmas, when last-minute shoppers filled the stores.
But those consumers were greeted with big discounts designed to pull them into the stores. Good for them, but bad for retailers' profits since heavy discounts hurt gross margins.
"The expectation is that it's going to be a very disappointing season. Business never materialized, and when it did, it was right around Christmas," said Steve Kernkraut, a retail analyst with Bear Stearns. "It was too little, too late, and I think it became way too promotional."
Sales at stores open at least a year, a closely watched figure known as same-store sales, increased 3.1 percent between Nov. 24 and Dec. 24, according to the TeleCheck Retail index.
But that's only about half the sales growth posted in 1999.
Wal-Mart Stores Inc. (WMT: Research, Estimates), the No. 1 U.S. retailer, and Federated Department Stores Inc. (FD: Research, Estimates), parent of Macy's and Bloomingdale's, have already said they expect December sales to fall short of estimates.
And two major retail chains, Bradlees and Montgomery Ward, announced they were going out of business at the tail end of the holiday season, done in by sluggish sales.
Sarah Scheuer, a spokeswoman for the National Retail Federation, said she will wait until all retailers have reported their sales figures before passing final judgment on the season, adding that sales were actually decent, but look bad compared with last year's spending spree.
"We knew it wasn't going to match the pace of last year. I think that some people had higher expectations, but all the indications were pointing to a slower season," Scheuer said. "Last year was white hot, a blockbuster, and this year we're going to see a good year."
Kernkraut said he sees a choppy year ahead for retailers, with a relatively soft first and second quarter, but more of a recovery if the Federal Reserve lowers interest rates as expected at the end of January.
|
|
|
|
|
|