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Stores cutting prices further Sales are weaker than anticipated this holiday season; Retailing


NEW YORK -- Sears, Roebuck & Co., Federated Department Stores Inc., May Department Stores Co. and other U.S. retailers are cutting prices throughout their stores to salvage a weaker-than-expected holiday season.

Sales at stores open at least a year rose less than 1 percent in the season's first 24 days that ended Sunday, said First Data Corp.'s TeleCheck. Same-store sales have slowed since rising 3 percent over the Thanksgiving weekend as warm weather hurt demand for clothing and shoppers procrastinated or held out for lower prices.

Retailers are banking on price cuts of half off or more to help meet sales forecasts for the season, which can account for as much as one-half of annual profit. Shoppers have also been holding out for the deepest discounts, even if that means buying goods after the holiday. The final two weeks of December accounted for about half of last season's sales.

"The post-Christmas period is becoming increasingly important," said portfolio manager Brian James at Loomis Sayles & Co., which owns shares of retailers.

Strong demand for household goods such as candles and clothing at low-priced chains such as Wal-Mart Stores Inc. and Kohl's Corp. could offset slumping sales at department stores, analysts said. Sales are meeting or exceeding forecasts at discounters such as Wal-Mart and Kmart Corp. and specialty chains including clothing seller Abercrombie & Fitch Co. and electronics chain Best Buy Co., analysts said.

Same-store sales are expected to rise 4.5 percent to 5 percent for the November-to-December period, the Bank of Tokyo-Mitsubishi said. Sales rose 4.4 percent in November.

Unusually high temperatures dampened demand for sweaters, coats and other cold-weather clothes at department stores. Clothing sales rose just 0.2 percent from Dec. 14 to Dec. 20, said the International Council of Shopping Centers.

Sears, the nation's largest department store, said same-store sales for the week that ended Saturday were less than it planned and below last year on slow clothing sales.

"If it wasn't for hard goods and hardware, they'd be doing terrible," said consultant Kurt Barnard, who has cut his overall holiday sales forecast to a rise of 3 percent to 4 percent, from estimates of 4 percent to 5 percent.

Dayton Hudson Corp. said sales at the Target discount chain were meeting its plan for a low- to mid-single-digit rise. Department stores were slightly better than expected.

Shoppers in recent years have been making more of their purchases later in the season, waiting for chains to cut prices.

"I'd wait till Christmas Eve if I could," said Marie Belland, who was shopping at Federated's Macy's store in Westwood, Calif.

Sales could get a boost in the next week as customers redeem gift certificates and return or exchange gifts. Almost 44 percent of consumers plan to shop tomorrow, the day after Christmas, topping the 38 percent who shopped the day after Thanksgiving, according to a poll by America's Research Group.

"The weekend will be a madhouse," said Britt Beemer, chairman of the market research firm.

Some chains are discounting additional items and cutting prices on marked-down goods to motivate shoppers. Macy's has savings of as much as 50 percent on some goods and is offering coupons for 20 percent off almost any item.

Discounts of as much as 60 percent have hurt earnings at J. C. Penney, analysts said. Morgan Stanley Dean Witter's Bruce Missett lowered his fourth-quarter earnings estimate to $1.15 a share from $1.35. Wayne Hood of Prudential Securities cut his fourth-quarter forecast to $1.33 from $1.40. Mounting promotions also prompted Missett to lower his fourth-quarter estimate for May to $1.96 a share from $2. May's chains include Lord & Taylor, Hecht's and Filene's.

Teen clothing and accessories chain Hot Topic Inc. and sweater and sportswear maker Nautica Enterprises Inc. have warned that earnings for the quarter will miss forecasts.

Still, chains such as Federated and Dayton Hudson, whose sales have been closer to expectations, will likely meet profit estimates because they have kept better control of inventory and have fewer goods to discount, analysts said.

xTC Specialty retailers that offer a singular style and brand, including Abercrombie & Fitch and Gap Inc., have posted strong sales through the holiday, analysts said.

"Their brands stand for something," said analyst Todd Slater of Lazard Freres & Co. "And, you can't get them in any other store but theirs."

Pub Date: 12/25/98

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