FL MORRIS / FMORRIS@STARBULLETIN.COM Holiday shoppers inundated Ala Moana Center last week. Retailers say Hawaii may buck the national trend of slipping Christmas spending this year.

Merchants face
grim season

Major retail chains report a final shopping
rush is failing to turn up this year

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By Anne D'Innocenzio
Associated Press

NEW YORK >> The holiday season is looking more grim for retailers, as merchants such as J.C. Penney and Federated Department Stores reported yesterday that even with heavy discounting, the late sales rush they were hoping for failed to materialize.

With the critical final weekend before Christmas less robust than expected, merchants are under even more pressure to rope in last-minute shoppers before Christmas and bargain-hunters afterward to salvage the season. Last year, post-Christmas buyers helped boost sales results.

"Shoppers are outsmarting the stores even more this year, and waiting until the last minute to get the best deals," said Burt Flickinger 3rd, managing director of Reach Marketing, a retail consulting group.

There weren't any bright spots in the figures retailers posted nationally yesterday.

(In Hawaii, retailers were busy adding up their weekend take and were not available for comment, but there were signs that Hawaii might be doing better than the national trend.

(Jonathan Kim, general manager of Windward Mall, said his center in Kaneohe seemed really busy over the weekend.

(Free entertainment had something to do with that "but in preliminary talks the majority of merchants seem to be doing better than last year," Kim said.

"It is better than last year," said Stephany Sofos, head of retail consultancy SL Stofos Co. "It's not like 2000, but definitely better than 2001," she said.

"People are spending and a lot of retailers are breathing sighs of relief," Sofos said.

That feeling was not shared across the country.)

Federated Department Stores Inc., which operates Bloomingdale's, Macy's and other stores, said that sales in the seven days ended Saturday "did not strengthen as much as anticipated."

As a result, it warned that sales for November and December at stores opened at least a year, known as same-store sales, will likely be even further below its previous estimate. The company had expected sales to be flat or decline 2.5 percent from a year ago.

Same-store sales are considered the best indicator of a retailer's health.

J.C. Penney Co. Inc., meanwhile, said same-store sales in its department store business weakened in the week ended Sunday. Month-to-date sales are now running only slightly above the company's goal for a 1 percent to 3 percent increase.

Target Corp. said that same-stores for the week ended Saturday were "well below" its monthly goal of a 3 percent to 5 percent gain for the corporation and its namesake store division.

Wal-Mart Stores Inc., the world's largest retailer, said same-store sales for December continue to track at the lower end of its goal for a 3 percent to 5 percent gain.

The company acknowledged that shoppers are holding back longer this season, noting that sales of holiday decorations, which usually take off earlier in the month, had just picked up last week.

The news is the latest disappointment for merchants, who already were bracing for modest sales gains given so much economic uncertainty, the lack of a must-have item, and a season that is six days shorter than last year. And barring any significant improvement, the mediocre holiday sales are expected to lead to a further shakeout in the retail industry, Flickinger said.

He predicts that 1,200 stores will close in the first six months of 2003, double the number in the year-ago period. "There are just too many stores facing too few shoppers," Flickinger said.

In particular, Kmart Corp., which hopes to emerge from bankruptcy by July 2003, faces its biggest test this season. Management is preparing another round of closings that is expected to be influenced in part by which stores draw more shoppers.

Flickinger also believe that department stores like Saks Inc. and Dillard's also face further store closing.

Some Wall Street analysts are already giving up on the season.

"We have been getting a spotty performance," said Michael P. Niemira, vice president of Bank of Tokyo Mitsubishi Ltd. "The season is shaping up to be very weak."

He noted that in the 2001 holiday season, he saw the spending momentum pick up starting in the third week of December.

Niemira now expects that same-store sales for the season will be up 1.5 percent. That's weaker than last year, which saw an increase of 2.1 percent, and below the already reduced 2 percent gain he estimated earlier.

The final week before Christmas has become increasingly critical.

According to the International Council of Shopping Centers, the period represented 34 percent of holiday sales in 2001, compared with 23.9 percent in 1999.

The American Express Retail Index found that 22 percent of 800 consumers surveyed are not expected to complete their holiday shopping until Christmas Eve.

Since at least 1996, the Saturday before Christmas has been the busiest day of the year. This year, that trend continues, according to ShopperTrak RCT, which captures total sales at 22,000 stores nationwide.

Total sales reached $7.2 billion on Saturday, up 4.5 percent from the year-ago period, barely edging out the $7 billion in revenues tallied the day after Thanksgiving. But the overall weekend's receipts were up only 1.6 percent to $12.6 billion, as Sunday's sales significantly weakened.

Stores are desperately trying to accommodate consumers' last-minute buying.

Kmart planned to stay open from 6 a.m. Friday until 8 p.m. Christmas Eve. Among the bargains: 70 percent off on jewelry and other discounts on key items such as toys and electronics.

Still, consumers pay a price for leaving shopping to the last minute.

"We're finding that things we wanted and planned to buy and thought we could come back for are not here anymore," said Jane McMakin, 47, who was shopping at a Kmart store in Billings, Mont.