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Traditionally strong retailers like Wal-Mart were among those reporting weak results.
©Associated Press
January 10, 2003
NEW YORK -- The already-disappointing holiday shopping season turned out to be even more dismal than anyone anticipated.
The nation's retailers released weaker-than-expected December sales figures Thursday, and even usually strong merchants such as Wal-Mart Stores Inc. and Target Corp. suffered amid economic uncertainty, a shorter season and a lack of must-have items.
Department stores and many mall-based apparel stores, particularly Talbots Inc. and AnnTaylor Stores Corp., also languished.
But there were some pleasant surprises. Resurgent Gap Inc. and J.C. Penney Co. extended their comeback. And teen retailers Hot Topic Inc. and Pacific Sunwear of California Inc. -- whose results at stores opened at least a year, known as same-store sales -- exceeded Wall Street's expectations.
Same-store sales are considered the best indicator of a retailer's health.
Throughout December, many of the nation's merchants reduced sales targets and predicted disappointing sales for the season, but Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd. was surprised Thursday at how widespread the declines were.
A number of retailers, including Talbots, Toys "R" Us Inc., Saks Inc., Payless ShoeSource Inc. and Borders Group Inc. lowered their earnings outlooks Thursday because of tepid sales and the aggressive discounting needed to move merchandise.
"This certainly can be characterized as a weak season," said Niemira, noting that 51 percent of the 82 stores he tracks registered sales declines in December.
The companies' same-store sales tally was up only 1 percent for December, far below his estimate of 2 to 2.5 percent.
That means same-store sales for the combined November and December period, which accounts for almost 25 percent of retailers' annual revenues, rose a meager 0.5 percent. That confirms that the 2002 holiday season was the weakest since at least 1970, when the index began to track same-stores sales data.
The results compare with a 2.2 percent increase for the November-December period last year over 2000.
Niemira and other analysts don't think consumer spending will improve any time soon.
"I think in the near term, there will be a continuation of a struggle in the retail industry," said Niemira, noting that the possibility of war in Iraq and the nation's shaky economy will remain obstacles this year.
He predicts same-store sales will be up a modest 3 percent for the first half of the year.
The disappointing news from merchants followed a more upbeat announcement by the Labor Department that new claims for unemployment benefits dipped last week, a sign that layoffs may be leveling.
For the workweek ended Jan. 4, jobless claims fell by a seasonally adjusted 19,000 to 389,000, the lowest level since Dec. 21. The decline came after new applications for unemployment benefits increased by 19,000 the week before.
Still, analysts say consumers are nervous about their jobs, and consequently will continue to scour stores for the best deals.
"There is still a great deal of conservatism among consumers," said Gregg Clark, vice president of retail at Cap Gemini Ernst & Young.
Gap, whose business started to recover in October following a prolonged slump, did surprisingly well with a 5 percent gain in same-store sales. That beat the consensus from Thomson First Call that called for a 3.6 percent increase.
Wal-Mart reported same-store sales were up 2.3 percent, below Wall Street's already reduced estimate of a 2.6 percent gain. Last month, Wal-Mart had pulled back from its projection of a same-store sales increase of 3 to 5 percent for December.
The discounter said inventory is at slightly higher levels than the company would like but is still manageable.
Target said same-store sales were down 0.3 percent, in line with reduced Wall Street expectations for a 0.4 percent decrease. The results were well below Target's original projection of a 3 to 5 percent gain.
AnnTaylor reported same-store sales were down 14.6 percent. Wall Street anticipated a 9.5 percent decline. Talbots had a 9.1 percent drop, steeper than the 5.1 percent drop analysts expected.
Burdines owner Federated Department Stores Inc. reported same-store sales were down 2.6 percent, about in line with Wall Street's reduced estimates.
-- Information from Bloomberg News was used in this report.
December sales gains reported by leading retailers, compared with sales from a year earlier. Sales include those from stores open at least a year, also known as same-store or comparable store sales, and total sales.
Wal-Mart Stores Inc.: up 2.3 percent
Target Corp.: down 0.3 percent
J.C. Penney Co. : up 4.7 percent at J.C. Penney stores only
Sears, Roebuck and Co.: down 4.6 percent
Federated Department Stores Inc.: down 2.6 percent
Gap Inc.: up 5 percent
May Department Stores Co.: down 4.7 percent
Dillard's Inc.: down 4 percent
Saks Inc.: down 2.1 percent