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BusinessWeek: January 11, 1993 |
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FROM THE MALLS,TIDINGS OF COMFORT AND JOY Hallelujah! For the first time in four years, retailers' prayers for a bountiful Christmas were answered. Many were able to report sharp real sales increases that actually exceeded their optimistic forecasts (table). "We expected Christmas to be good, but it's been much stronger than we expected," says Clark Hinkley, executive vice-president at Talbots Inc., the $630 million women's apparel chain. It reported increases of 20%, before adjustment for retail inflation of about 2%, at its stores. Talbots wasn't alone in hitting double-digit increases. Many retailers--among them, J.C. Penney, Bloomingdale's, Tiffany & Co., and L.L. Bean--claimed real sales gains of 8% or more. Although sales at Kmart Corp. barely budged after adjustment for inflation, Sears, Roebuck & Co. reported inflation-adjusted increases of some 5.5%. WINDFALL. As the Yuletide euphoria fades, though, retailers should wonder whether consumers can keep up the pace, since their sense of well-being was fueled by circumstances that aren't likely to recur. For one thing, shoppers in the Southeast whose homes were damaged by Hurricane Andrew had extra cash to spare, thanks to insurance claims sent out prior to Christmas. For another, President Bush reduced payroll withholding taxes in 1992, so consumers ended up with $25 billion extra to spend. "That was a fine way to jump-start the economy," says Carl Steidtmann, chief economist at retail consultants Management Horizons. But consumers will have to pay that money back when they file their income tax returns in April. The 1992 calendar also cooperated, serving up two extra selling days between Thanksgiving and Christmas, and landing Christmas on a Friday. That gave consumers all weekend to shop post-Christmas sales. If sales do dry up, at least stores can take comfort from the Christmas results. Shoppers weren't just buying the basic turtlenecks and black socks that they bought the past couple of years. "We saw more want- than need-based purchases this year," says Matt Howard, senior vice-president for marketing at Sears Merchandise Group, which reported increased demand for such high-ticket items as refrigerators, camcorders, furniture, and large-screen TVs.Sears, the nation's third-largest retailer, did exceptionally well with its $1,000 Kenmore refrigerators and personal computers from IBM, Packard Bell, and Apple. Sears shoppers also splurged on home entertainment, buying up $599 to $999 camcorders from Sony, Panasonic, and Hitachi, as well as Sears' private-label LXI 27-inch TVs for $499. Department stores also benefited from the growing tendency of consumers to stay at home, whether for work or play. Dayton Hudson Corp.'s big sellers included Apple's new Performa computers, which sold for $1,299 to $2,899. At Bloomingdale's, the most upscale division of Federated Department Stores Inc., sales of upholstered furniture, lamps, and rugs rose more than 30% this Christmas. "This is the first time in a decade I can recall furniture doing this well," says Jeffrey Sherman, president of Bloomingdale's. JUNK FOOD. Consumers also evinced a renewed appetite for luxury apparel. The Chinese government, a major supplier of cashmere to the U.S., sharply lowered prices this year, says retail consultant Alan Millstein. When Saks Fifth Avenue reduced cashmere sweater prices by 25% to 40%, they sold out, reports Saks President Rose Marie Bravo. And a $2,000 price tag didn't deter shoppers from snapping up Saks's entire supply of Geoffrey Beene pants suits. "They're quite pricey," says Bravo, "but they're wool jersey and beautifully made." Naturally, cheaper clothing moved, too. Dayton Hudson's biggest sellers included $30 women's silk shirts and $20 body suits. At J.C. Penney Co., $26 men's dress shirts, in white and colors, did extremely well, says Ray Pierce, president of Penney's men's division, as did $40 sweatshirts emblazoned with the logos of the Los Angeles Raiders and Dallas Cowboys. Gourmet delicacies and junk food appeared under many Christmas trees. Shoppers snapped up $200 bread machines at Rich's, Federated's Atlanta-based division. At Mervyn's, a Dayton Hudson chain based in Oakland, Calif., shoppers pounced on $24.99 animal-shaped cookie jars that meow, moo, or bark when the lid is lifted. And Mr. Bulky Treats & Gifts, a 156-store candy chain based in Troy, Mich., sold thousands of pounds of candy canes, Hershey kisses, and peanut-butter cups. Retailers' holiday smiles may yet vanish. The first half of 1993 is not expected to be a barn-burner, and who knows how long shoppers will feel optimistic? Still, this was the first Christmas in years when a major store wasn't about to file for Chapter 11. For merchants, that alone amounts to a minor miracle. SANTA DELIVERED
Estimated holiday sales
gains (inflation-adjusted)
L.L. BEAN 23.0%
BLOOMINGDALE'S 8.0
BRONSON IMPORTS* 10.0
BROOKS BROTHERS 9.5
GALERIES LAFAYETTE 13.0
KMART 0.5
Estimated holiday sales
gains (inflation-adjusted)
R.H. MACY 0.0
J.C. PENNEY 9.0
SAKS FIFTH AVENUE 8.0
SEARS M'DISE GROUP 5.5
TALBOTS 18.0
TIFFANY 12.0
DATA: COMPANY REPORTS, BW*Christmas ornaments
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