Nearly all indicators show a weak holiday sales season

It’s been a tough Christmas for many retailers, according to sales data, retail experts, and financial reports from many of the largest retailers.

In its weekly report, The Bank of Toyko-Mitsubishi and UBS Warburg forecast holiday sales in November and December would be up an anemic 1.5% over last year, the smallest gain since the banks began tracking weekly sales in 1970.

“The bottom line is, the [holiday sales] performance is likely to be the weakest on record,” Michael Niemira, retail analyst with Bank of Tokyo-Mitsubishi Ltd. (BTM), told Reuters.

Scott Krugman, a spokesman for the National Retail Federation, told The New York Times its original estimate of 4% growth for December would probably shrink to 3.5%. Worries about the economy and about an impending war with Iraq and new terrorist attacks kept many shoppers from buying, even with deep discounts on many items. Indeed, inventories actually crept up this month.

Sales figures for the week preceding Christmas were down 5.8% from the same period last year, according to a report by ShopperTrak RCT, a Chicago-based company that follows retail sales. In fact, sales have been negative since the penultimate week in November, according to the report, titled the National Retail Sales Estimate. The worst week was the one that ended on Nov. 30, when sales were down 20% from the previous year. The figures, covering U.S. general merchandise, apparel, furniture and other store sales, are based mainly on weekly propriety retail data and benchmarked to U.S. Department of Commerce monthly retail sales data.

Retail executives joined in with a less than optimistic assessment of the holiday season, according to the latest Retail Executive Opinion Survey, a new monthly index by the National Retail Federation and the Bank of Tokyo-Mitsubishi Ltd. (BTM).

The survey suggests that little has changed from the previous month. The Retail Sector Performance Index for December stands at 44.9%, relatively unchanged from November’s 43.3%. The RSPI measures retail executives’ evaluations of monthly sales, customer traffic, average transaction per customer, employment, inventories, and a six-month-ahead sales outlook expectation. The RSPI is based on a scale of 0%-100% with 50% equaling normal.

The RSPI December Industry Pricing Index, which is an assessment of industry discounting or pricing power, stood at an “extremely low” 16.3%, indicating widespread discounting. This is the lowest reading for the index since the survey began in September.

“Higher inventories have helped increase the breadth of price discounting,” says Michael Niemira, Senior Retail Analyst, Bank of Tokyo-Mitsubishi, Ltd. “This suggests that retailers are beginning to use unplanned markdowns to attract last-minute shoppers, clear excess inventories, and pad their holiday sales numbers.”

“This has certainly been a challenging holiday season for the retail industry,” adds NRF president and CEO Tracy Mullin. “As usual, the high degree of last-minute shopping suggests that we are a nation of procrastinators. Retailers will be counting on post-holiday sales more than usual to pad their holiday numbers. As much as 10% of holiday sales can be recorded the week after Christmas.”

Wal-Mart Stores, the nation’s largest retailer, said Thursday it was lowering its estimates of December sales growth in stores open at least a year. The company said its sales would increase by 2% to 3% this month instead of the 3% to 5% it had originally forecasted. Last year, Wal-Mart posted December sales growth of 8.1%.

On Tuesday, Federated Department Stores said its sales in the third week of December fell below expectations, and it warned that sales for November and December would be less than anticipated. The company, which owns Bloomingdale’s and Macy’s, had predicted a drop of 2.5%, compared with the same period last year.

Some stores were offering markdowns of as much as 75% yesterday, the Times reports. And some reported plenty of traffic. At Bergdorf Goodman in Manhattan, Ronald L. Frasch, the chief executive, told the Times the store was filled with people exhibiting “a very strong, strong interest in buying things for themselves.” He added that the store had met its expectations for the season but would not reveal numbers until next month.

Target Stores, a unit of the Target Corporation, said earlier this month that its December sales would fall short of expectations. FAO Inc., which owns the FAO Schwarz and Zany Brainy chains, said Tuesday that it would close 70 of its toy stores by March in an attempt to return to profitability.

At J.C. Penney, a spokesman told the Times that the store was anticipating sales growth of 1% to 3% and that the final days before Christmas “certainly didn’t do anything to change that expectation.” Sales of jewelry, children’s clothing, and small appliances all were strong, said spokesman Tim Lyons, although catalog sales are expected to fall by 20% from last year.

One continuing bright spot in the holiday season has been online sales. Consumers spent $1.4 billion online last week in non-travel and non-auction goods and services, according to a report released Tuesday by ComScore Networks. That was up 18% from the week before Christmas last year.

However, ComScore had projected that fourth-quarter online spending, excluding travel and auction sites, would grow 27% over the same period last year to $13.8 billion. To date, consumers have spent $12.1 billion online, excluding travel and auction sales, up $9.7 billion, or 25%, from the same period last year.

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