Wal-Mart Is Bright Spot In Retailers' Deep Slide
Friday, December 5, 2008
November retail sales reported yesterday reaffirmed that this is the season of Wal-Mart.
The big-box behemoth reported that U.S. same-stores sales exceeded its expectations in November, rising 3.4 percent over last year. Sales for most other retailers plummeted. "November is in, and it's ugly," Todd Slater, an analyst at Lazard Capital Markets, wrote in a research note.
The results do not bode well for the rest of the holiday shopping season, which accounts for about 20 percent of retailers' annual revenue. About 54 percent of shoppers last month said they planned to spend less than last year during the holiday, according to a survey by consulting firm TNS Retail Forward. Only about 6 percent said they were expecting to spend more -- a third fewer than those surveyed before the financial crisis.
"The outlook for the final shopping days of the holiday is grim," said Frank Badillo, TNS Retail Forward senior economist. "The good news is that shoppers are not further tightening their spending plans."
Department store giant Macy's said same-store sales dropped 13.3 percent in November compared to the same month last year. Total sales dropped 14.1 percent, to $2.3 billion from $2.7 billion last year.
Macy's attributed part of the decrease to Thanksgiving coming late in the month this year, which shaved off crucial shopping days before Christmas. Macy's also said Black Friday, the day after Thanksgiving, was the best on record, but it acknowledged that the economic meltdown affected sales throughout the month.
Other retailers posted even more dire results. Stein Mart declined 14.2 percent. Chico's fell 15.4 percent. Kohl's was down 17.5 percent. Abercrombie & Fitch plunged 28 percent.
"It's the worst I've ever seen," said Theresa D. Williams, assistant professor of marketing at Indiana University. "They'll be looking to cut costs in ways that they probably haven't considered in quite a while."
Many retailers sacrificed profit margins to discount merchandise that they hoped would lure in customers on Black Friday. Gap said yesterday that it offered aggressive promotions to help clear merchandise from its stores, even though that hurt its bottom line. Consulting firm ShopperTrak estimated that sales on Black Friday grew 3 percent from the previous year to $10.6 billion.
But retailers were unable to hold onto that momentum. Sales dropped 0.8 percent to $6 billion on Saturday and fell another 2.3 percent to $3.5 billion on Sunday, ShopperTrak reported. The temporary boost also did not make up for lackluster sales the rest of the month.
"Results from post-Thanksgiving holiday sales, particularly Friday, were stronger than the rest of the month, but were insufficient to offset earlier weakness," said Gregg Steinhafel, chief executive of Target, where sales fell by 10.4 percent, more than expected.
One bright spot has continued to be Wal-Mart, whose low-price message is resonating with consumers. The company said lower gas prices encouraged shoppers to make more trips to its stores and left them with more discretionary income to spend. Thanksgiving drove a record amount of grocery sales, and a strong Black Friday capped off the month.
"Even in a tighter economy, consumers want to celebrate the holidays with their families," said Eduardo Castro-Wright, vice chairman of Wal-Mart and head of its domestic division.
However, the company said its sales figures were overshadowed by the death of a worker at a store in New York on Black Friday. Jdimytai Damour, who worked for a company hired by Wal-Mart to help staff its stores that day, died as a throng of shoppers rushed into the store and knocked him over, police said.
"We consider Mr. Jdimytai Damour part of the extended Wal-Mart family and are saddened by his death," Castro-Wright said.