Coal In Some Retailers' Stockings

Shoppers flocked to malls Tuesday to take advantage of deep discounts the day before Christmas, but merchants had little hope that last-minute buying would rescue what's shaping up to be the weakest holiday season in more than three decades.

Even so, a new sales push begins Thursday. According to one estimate, as much as ten percent of holiday business is done in the week after Christmas. And analysts say you can expect a continuation of aggressive discounting as retailers look to boost their meager bottom lines.

"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.

Despite a better-than-expected surge following Thanksgiving, customers seemed reluctant to spend, uninspired by the lack of must-haves and stymied by worries about the economy. The compressed season — six days shorter than a year ago — also had an impact on consumers, who never quite recovered from the lateness of Thanksgiving and seemed to delay their gift buying even more than usual.

As a result, merchants are counting on procrastinators like Beverley Houghton of West Orange, N.J. to boost holiday sales. She said she always finishes this late, and this year, she spent about the same as last.

"I'm hoping to get a sweater and a gift card and I'm out of here," Houghton said at Essex Green Shopping Center in West Orange.

At Circle Centre Mall in Indianapolis, Melanie Rominger was piling stocking caps onto her already growing stack at Abercrombie & Fitch.

"I got shirts for $10 and pullovers for $15. So it's really good," the Indianapolis resident said.

Rominger said she spent more this year than in the past.

"I keep the economy running," she said.

Christmas Eve day accounts for only about 4 percent of overall holiday sales, according to C. Britt Beemer, chairman of America's Research Group. According to the International Council of Shopping Centers, Christmas Eve day was the seventh busiest holiday shopping day last year.

Still, the week before Christmas has become increasingly critical. Last year, it accounted for 34 percent of holiday sales, compared with 23.9 percent in 1999, the trade association said.

Since at least 1996, the Saturday before Christmas has been the business holiday shopping day. That trend continued this year, though the weekend's sales weren't as robust as expected.

Several major merchants, including Target and J.C. Penney, reported that much-hoped-for sales momentum failed to materialize last week.

Federated Department Stores, whose stores include Bloomingdale's and Macy's, said sales in the seven days that 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, likely will be even further below its previous estimate. The company had expected sales to be flat or decline 2.5 percent from a year ago.

Wal-Mart Stores Inc. said same-store sales for December have been tracking at the lower end of its goal for a 3 percent to 5 percent gain.

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.