Stores use heavy markdowns
to draw wary consumers
BY ANNE D'INNOCENZIO
THE ASSOCIATED PRESS
NEW YORK — The holiday shop
ping outlook was hazy Thursday after
the nation’s retailers reported a mixed
start to the season that showed con
sumers were willing to spend only
when they found a bargain.
Retailers are likely to resort to
heavy markdowns in hopes of meet
ing their sales targets. Many of last
month’s winners were stores that
heavily discounted over the Thanks
giving weekend, including Wal-Mart
Stores Inc. and J.C. Penney Co. Inc.
November had some surprises —
upscale retailers were among the dis
appointments, including Nordstrom
Inc., usually a top performer. On the
upside, Limited Brands Inc. had sol
id gains after struggling for months
with its fashions. Limited’s sales
were fed by a combination of aggres
sive price cutting and a makeover at
its Express division.
“You had some very good per
formances by only a handful of
stores, but you also had a fair
amount of weakness. Most of the
business was driven by promo
tions,” said Michael P. Niemira,
chief economist at the International
Council of Shopping Centers.
“More of the season’s sales now
ride on December, which is dicey be
cause of the weather and promotion
al activity,” which could hurt stores’
profits, he said.
The UBS-International Council of
Shopping Centers’ November sales
tally of 65 retailers rose 3.5 percent
last month; the results matched
Niemira’s forecast, but beat a mea
ger 1.8 percent increase a year ago.
The sales tally is based on sales at
stores open at least a year, known as
same-store sales.
Niemira added, “The economic
numbers look better, but on the other
hand you worry about consumers’
ability to spend.”
The Commerce Department re
ported separately Thursday that per
sonal spending edged up in October,
while incomes rose 0.4 percent. In
another report, the Labor Depart
ment said the number of hurricane
related job losses totaled just 9,600
last week, a substantial improvement
from 21,000 the previous week.
Retail analysts were optimistic go
ing into the holiday season because
gasoline prices have fallen from their
September highs. The latest batch of
upbeat economic data and a rebound
in consumer confidence in Novem
ber were encouraging signs that
shoppers might be more generous.
But big challenges remain. While
gas prices have fallen, they’re still
above last year’s levels and home heat
ing costs are also expected to be high.
Another factor is that there does
n’t seem to be any particular must
have item this season besides the
latest new game console from Mi
crosoft, Xbox 360. And some ana
lysts believe consumers’ focus on
electronics — particularly flat
screen TVs and digital cameras —
could hurt apparel sales.
Even in toys, electronic items are
doing the best, particularly Hasbro
Inc.’s, iDog and Fisher-Price’s Dora’s
Talking Kitchen, according to retailers.
Madison Riley, a strategist at Kurt
Salmon Associates, noted that a late
Hanukkah, which begins Dec. 25,
could further “accentuate the last
minute shopping,” putting stores
more on edge.
Wal-Mart, which stumbled last
holiday season by not discounting
enough, benefited by offering more
markdowns this year. The world’s
largest retailer posted a same-store
sales increase of 4.3 percent, match
ing estimates from analysts polled by
Thomson Financial.
It expects same-store sales growth
for December of 2 percent to 4 percent.
Discount rival Target Corp., whose
business may have been hurt by Wal
Mart’s aggressiveness, had a 2.6 per
cent increase in same-store sales. The
results came slightly less than the 2.7
percent Wall Street forecast. Costco
Wholesale Corp. reported a 6 percent
gain in same-store sales, short of the
7.9 percent estimate.
High-end stores such as Nord
strom and Neiman Marcus Group
Inc. reported only modest gains.
Nordstrom’s same-store sales rose
2.8 percent, well off the 4.6 percent
analysts expected.
Neiman Marcus had a 4 percent
same-store sales increase. Thomson
Financial does not offer sales esti
mates because the luxury retailer is
now privately held.
J.C. Penney had a 3.6 percent same
store sales gain in its department store
group, above the 1.9 percent estimate.
Gap Inc. posted a 4 percent decrease
in same-store sales, though better than
the 5.1 percent analysts forecast.
Limited had a 5 percent gain in
same-store sales, better than the
2 percent forecast. The solid in
crease was helped by a dramatic im
provement in business at its Express
stores, which is attracting more cus
tomers with a less expensive casual
clothing strategy. Its previous em
phasis on pricier wear-to-work
clothes failed.
Abercrombie & Fitch Co. was a
big winner, with a 23 percent gain
in same-store sales that beat the
21.4 percent estimate. The teen re
tailer, which has refrained from dis
counting, proved that if the mer
chandise is compelling, teens will
buy.
American Eagle Outfitters Inc.,
which reported its results late
Wednesday, had a disappointing
1.7 percent increase, well below the
10.2 percent Street estimate.
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