For Retailers, Season Gets Off To a So-So Start

Lori Feiser of Centreville shops at a Wal-Mart in Fairfax. Retailers have gotten a sluggish start to the holiday shopping season.
Lori Feiser of Centreville shops at a Wal-Mart in Fairfax. Retailers have gotten a sluggish start to the holiday shopping season. (By Ken Cedeno -- Bloomberg News)

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By Ylan Q. Mui
Washington Post Staff Writer
Friday, December 2, 2005

Retailers reported moderate November sales growth yesterday, putting them under pressure to trot out bargains and making the next three weeks critical to a strong holiday season, analysts said.

Chain-store sales were up about 3.5 percent last month over November a year ago, led by apparel-chain stores and discounters offering big sales, according to the International Council of Shopping Centers. Department stores performed the worst, with increases of just 0.6 percent .

"The strength was largely driven by promotions and did not provide as strong of a start to the holiday season as some retailers would have liked," said Michael Niemira, ICSC's chief economist and director of research.

Last month's sales figures are particularly significant because they include the weekend after Thanksgiving, the ceremonial kickoff to the holiday shopping season. Some stores offered blockbuster promotions on Black Friday -- so nicknamed because it is when retailers traditionally moved from the red into the black -- that had shoppers standing in the bitter cold in the wee hours of the morning.

Wal-Mart set the stage with aggressive promotions, offering to match competitors' prices and selling HP Pavilion laptops for $398. The company estimated that 2 million people across the country filed into its stores within the first hour they were open Nov. 25. Target offered similar bargains, including a 15-inch LCD TV for $188.

"Those that promoted heavily got market share," Niemira said. "Those that did not seemed to lose a little bit of ground."

Wal-Mart Stores Inc. said sales last month at stores open at least one year grew 4.3 percent compared with last year. Annual sales are up 3.7 percent. The deep discounts offered on Black Friday may have slightly depressed the numbers, said Bill Martin, co-founder of ShopperTrak RCT Corp., a Chicago research firm.

Wal-Mart, the nation's largest retailer, said that computers, dolls, portable DVD players and video games were big sellers over Thanksgiving weekend and that it expects sales to jump an additional 2 to 4 percent in December.

Trailing Wal-Mart was Target Corp., with a 2.6 percent sales increase over last November, well below the company's original projections of 4 to 6 percent. So far, annual sales are up 5.8 percent. The company said it experienced a slight decline in transactions last month but hopes that December will bring a solid sales boost of 4 to 5 percent.

Several department stores posted lackluster results, with sales dropping 3.4 percent last month for Federated Department Stores Inc., which includes Macy's and Bloomingdale's. The chain recently acquired the May Department Store Co. -- which includes Hecht's -- but those stores are not included in that sales figure.

Consumers are still feeling "a little malaise," said Richard Hodos, president of retail real estate firm Madison HGCD LLC. Gas prices have dropped from their record highs, but hefty home heating bills still loom ahead and the housing market seems to have cooled.

Niemira said growth was also dampened by sales of gift cards, which are booming but are not counted until they are redeemed, and by the Internet.

Monday was one of the biggest sales days for online retailers. Consumer research firm ComScore Networks Inc. estimated that shoppers spent about $485 million -- a whopping 26 percent increase over last year.

Analysts expect sales at brick-and-mortar stores to slow down early this month. Shoppers are tired after the big Thanksgiving weekend and need time to recharge, they said.

"The pattern that we're about to see for the holiday season -- and we see it every year -- is that . . . there's a big bang and then there's a lull," said Scott Krugman, spokesman for the National Retail Federation, a trade group.

But retailers are counting on shoppers to rally, and analysts said stores should pull out all the stops to lure them in.

"It will be a nail-biting experience, and it will come down to the very, very end," Hodos said.


© 2005 The Washington Post Company

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