This holiday shopping season is turning out to be more dismal

Monday, December 10, 2001

NEW YORK

The Christmas shopping season, already expected to be disappointing, is turning out to be even more gloomy for the nation's retailers.

With November sales results the weakest since 1990, merchants have few hopes for the final weeks of the season as they contend with unseasonably warm weather and consumers' frugality. Even heavy discounts, which are deeper and earlier than a year ago, haven't made consumers forget their worries about job security.

The latest unemployment data were equally disquieting. The Labor Department said Friday the nation's jobless rate took another big leap upward in November to 5.7 percent, the highest level in six years, as 331,000 more Americans lost their jobs. And it marked the second consecutive month of massive job losses as the already weak economy dealt with the blow delivered by the Sept. 11 terrorist attacks.

The report dashed rising hopes that the recession had bottomed out and that a rebound was near.

"This is not the lead into the holiday season that retailers would have hoped for," said Michael Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd., who cut his holiday sales growth forecast in half to 2 percent from 4 percent on Thursday, when the nation's retailers reported their dismal November results.

"Neither the job market nor the retail industry will improve quickly, and right now, retailers don't have a lot of tools to work with," Niemira said. "They can discount more, and you can basically hope that whatever promotions they use will get people into the stores."

The Bank of Tokyo-Mitsubishi Ltd. index rose only 2 percent for November, below the 3 percent forecast. The results were the weakest since November 1990, when the index had a 1.3 percent gain.

The weeks following the Thanksgiving weekend are traditionally subdued, with a last-minute shopping rush beginning the week before Christmas, but Niemira was surprised to see that sales have been even more lifeless than he expected. Sales for the 79 stores he tracks dropped 1.7 percent during the week of Nov. 25 from the previous week.

Niemira and others are bracing to see how the rest of the season plays out.

"Retailers have to make every prospective customer their best customer," said John Champion, managing director of Kurt Salmon Associates, a retail consulting firm. "The 'sale' signs are up in mass quantities, but it doesn't seem to be helping."

The International Council of Shopping Centers said sales at 4,000 specialty stores at 80 regional malls nationwide dropped 2.1 percent from Nov. 23 through Dec. 2 from the year-ago period.

Tele-Check Services, Inc., a check approval service, said sales paid for by check at stores open at least a year rose a modest 2.1 percent for the first 10 days of the season.

One of the biggest disappointments has been apparel, particularly sweaters and outerwear that have been hit the hardest by almost tropical temperatures in most of the nation.

The average temperature last month was 47.8 degrees, far higher than the 38.4 degrees a year ago, according to the National Climatic Data Center.

"When it is 70 degrees out, you're not thinking Christmas," said Scott Bernhardt, senior vice president of business development at Planalytics, which predicts weather conditions for corporate clients.

He said a cold weather snap will come later this month, but that might be too late for many retailers who hoped to sell winter clothes early and at regular prices.

"The apparel area has been a disaster," said Carl Steidtmann, director of Deloitte Research, noting that the category has also been bruised by consumers' shift toward basics, away from anything ostentatious.

Analysts said they expect to see heavier discounting as retailers try get rid of the merchandise.

Even the toy industry's holiday sales are being stymied by an unexpected surprise: a slew of toy shortages that started before the Thanksgiving weekend.

"I am seeing sold-out shelves for items that people want, and everything else is languishing," said Chris Byrne, an independent toy consultant. "This is absolutely going to be lost sales for retailers and manufacturers."

Byrne believes that a growing number of parents who don't find their first-choice toy, aren't grabbing an alternative. "People would rather wait, and have fewer toys under the Christmas tree," he said.

One of the few bright spots so far has been consumer electronics. Both Circuit City Stores Inc., and Best Buy Co. reported solid sales so far this season, fed by DVD players, digital TVs and the new game consoles.

"The business is trending in the right direction," said Gary Balter, an analyst at CS First Boston, noting that holiday sales should be up anywhere from 3 percent to 5 percent.

Even personal computers are seeing some pickup in sales, rebounding from a sharp drop in business a month ago.

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