The retail detail
Early edition: Will it be the most wonderful time of the year for stores? Signs point to confident consumers eager to shop till they drop.
By MARK ALBRIGHT
Published November 18, 2006
Started your Christmas shopping? Probably not. So retailers will be beating the drums early this week.
Kmart won’t close for Thanksgiving. Many department stores, big-box retailers and local malls this year plan to open an hour earlier, at 5 a.m. or 6 a.m., with a riot of heavily advertised doorbuster deals the day after Thanksgiving.
And Prime Outlets Ellenton will join Wal-Mart by opening at midnight on what retailers call Black Friday with prize drawings, giveaways and extra discounts to jump-start the traditional launch of the holiday shopping season.
They’re even offering a $100 gift certificate drawing for workers who brave the graveyard shift.
“We’re offering customers a head-start to get their shopping done before the other stores open,’’ said Sara Ozgun, marketing director for the 130-store outlet mall. “We’ll be open 21 hours straight.’’
All this extra night-owl shopping underscores why retailers feel the need to dial up the hoopla to quickly instill a sense of urgency.
Experts say the economic planets are aligned for stores to have a decent sales gain and even more solid profit performance during their annual two-month holiday shopping marathon. Yet shoppers need a wakeup call after retail sales lost steam in October. Worse, fewer shoppers started loading up on holiday gifts in September this year. About 24 percent of shoppers started holiday buying before Halloween, down from 29 percent in 2005, according to BIG Research.
Meanwhile, several product trends lift retailers’ hopes.
Demand is rising for women’s skinny jeans, long necklaces, round-toe shoes and just about anything in black. Two new video game consoles, Sony PlayStation 3 and Nintendo’s Wii, debut. Flat-panel TV demand is rising as prices fall, and more cell phones wait to be equipped to play MP3s or the latest ring tones. Buzz is spreading about such toys as a T.M.X. Elmo , Bratz Forever Diamondz , Princess Genevieve Barbie, Blue Man Group Tubes percussion kit, LEGO Mindstorms NXT and the $70 Kid-Tough Digital Camera for preschoolers.
• • •
Overall, the National Retail Federation forecasts sales of general merchandise will increase a robust 5 percent to $457-billion during November and December. That’s a bit below last season’s 6.1 percent gain that marked a six-year peak.
“Retailers have kept their inventories fairly lean, so this should be a solid season for sales and even better for their profitability because they’re keeping their expenses in line,’’ said Carl Steidtmann , chief economist for Deloitte Research.
Which is not to say the season won’t be another relentless parade of planned-in-advance promotional sales, price cuts and deals.
“The holidays are promotional by definition, but we don’t see this one being more so than others,’’ said Karen Hoguet, chief financial officer of Federated Department Stores Inc., which owns Macy’s and is shooting for a 3 to 5 percent sales gain in stores open more than a year.
The reasons for the optimism? Inflation and unemployment remain low. After losing ground for a few years, consumers have a bit more disposable income. Gas prices eased.
The housing sales decline and skyrocketing tax and insurance bills are starting to pinch in markets such as Florida. But research compiled for Boston Consulting Group found 67 percent of consumers plan to spend more or the same as last year anyway, and only 22 percent plan to spend less because of the housing market.
Consumers’ “view about home prices is 'I’m not moving and I don’t rely on paper profits from my house’ ’’ to buy Christmas presents, said Michael Silverstein, group consumer practice leader and author of Treasure Hunt: Inside the Mind of the New Consumer.’’
Experts see shoppers shifting Christmas bills from home-equity loans to higher-interest credit cards.
Consumer confidence is high. It’s getting a boost now that the distraction of a divisive election is over.
“It was clearly a protest vote outcome,” said Brian Bethune, an economist for Global Insight. “After all that negativity, we’re in a bit of a honeymoon: new faces, new options and a perception that maybe the political process is working.’’
• • •
The holidays remain critical for many retailers whose entire year becomes feast or famine in the final two months. The holidays add up to a third of annual sales and half the annual profits for retailers such as jewelers, toy stores and many apparel chains.
Department stores are supposed to do better than specialty apparel stores this time, said Dana Telsey, who heads a retail investment research firm.
Indeed, a survey by BIG Research found more women shifting their apparel spending to Kohl’s, Macy’s and JCPenney this winter and away from specialty chains and Wal-Mart, more evidence of the discounter’s fizzled first attempt at affordable fashion.
“We feel pretty good about our prospects,’’ said Myron Ullman, chairman and chief executive of J.C. Penney Co., which last week increased its earnings estimate for the quarter.
Wal-Mart figures into the woes of discounters. Gas prices and income gains put more of a squeeze on lower income groups. So Wal-Mart rolled back prices on Nov. 1 for hundreds of toys and electronics to stimulate demand and put pricing pressure on rivals.
“I’m expecting the high-end and middle-market stores will do well while the lower end continues to struggle,’’ said Bob Beall, chairman of Beall’s Inc. His family-owned retail empire plans double-digit sales gains for its 72 department stores and less than half that from its 500 outlet stores.