Associated Press
NEW YORK — The outlook for the holiday season grew dimmer Thursday as the nation’s largest retailers, bruised by a combination of unseasonable weather and a sluggish job market, reported the weakest November results since 1990.
Discounters and other value-oriented stores, particularly Wal-Mart Stores Inc., Kohl’s Corp., and TJX Cos., had the strongest sales as consumers scoured for bargains. Mall-based merchants, particularly apparel and department stores, suffered once more, languishing among piles of discounted sweaters and outerwear.
Most notably, Gap Inc., whose business has dropped precipitously, saw sales at stores open at least a year, known as same-store sales, plummet 25 percent, worse than the 17 percent decline analysts expected. Same-store sales are considered the best predictor of a retailer’s strength.
Gap warned that fourth-quarter earnings would be "considerably worse" than the 6 cent per share loss reported in the third quarter, excluding a tax-related charge.
Federated Department Stores Inc. met expectations, but said it still anticipates December same-store sales to be down 11 percent to 14 percent and fourth-quarter sales to be off as much as 10 percent.
"The holiday season is not shaping up very well," said Michael Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd., who cut his 4 percent holiday forecast in half to 2 percent after seeing the retailers results Thursday.
The Bank of Tokyo-Mitsubishi’s same-store sales index of 79 retailers was up 2 percent, below the 3 percent forecast. The November results fell below the 4 percent gain recorded a year ago, and were the weakest since November 1990, when the index had a 1.3 percent gain, Niemira said.
The November results were in fact inflated by 1.5 percent, Niemira estimates, given that many retailers, largely department stores, benefited from a quirk in the retail calendar. Retailers including Federated Department Stores, May Department Stores Co., and Kohl’s Corp., used a reporting period that included nine days of post-Thanksgiving sales, compared with two days a year ago.
Sales figures for those retailers in December will appear weaker than they really are because of the calendar shift.
November accounts for about 8.3 percent of a retailer’s annual sales, while December makes up about 15.5 percent, according to Niemira.
Jeffrey Feiner, a managing director at Lehman Brothers, said stores had to discount more heavily than usual to get consumers into the stores, but sales nonetheless were below expectations. His index of 22 major retailers showed a same-stores sales gain of 1.3 percent, instead of the 3 percent Feiner expected. He noted that the unseasonably warm weather reduced the overall sales index by 0.5 percent.
The disappointing sales figures contrasted with two government reports that hinted the recession might be bottoming out. The number of Americans receiving unemployment benefits took the biggest plunge in 18 years in late November while orders to U.S. factories in October posted the first increase since May.
But a recovery will come too late for merchants, who are bracing for the worst holiday season in 10 years.
Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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