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Beware: Heavy store traffic doesn't mean huge sales
2006-11-25
Consumers packed malls and store parking lots over the U.S. Thanksgiving holiday weekend, leading many to expect this year's holiday sales figures could blow away expectations and lift retail stocks. But early anecdotal data suggest heavy discounting drove demand. If that's true, sales gains could be less than last year and retail stocks could tread water for the remainder of the year. "You already know it's a high traffic day," said Laura Richardson, a consumer analyst at BB&T Capital Markets. "What I'm looking at is traffic relative to what I'm used to seeing and the promotional efforts retailers are making. A lot of companies I follow are cutting (prices) more than last year and not getting great traffic. That's not a great sign for sales or profits." Early-bird "doorbuster" promotions had customers lining up outside stores like electronics retailer Best Buy Co. Inc. (NYSE:BBY) before dawn on Friday. But the deals that attracted them, like high-definition televisions for less than $1,000, were just the same tactics retailers have used the last couple of years, said Michael McNamara, vice president of research and analysis for MasterCard's SpendingPulse. Retailers "see traffic like this every year," McNamara said, adding that he was surprised by the amount of buzz generated by photos showing consumers pushing and shoving for the season's hot toys and electronic gadgets. Indeed, Wal-Mart Stores Inc. (NYSE:WMT) predicted a rare decline in monthly sales on Saturday, even as bargain hunters jammed stores at the start of the holiday season. The world's biggest retailer estimated that November sales fell 0.1 percent at its U.S. stores open at least a year -- a closely watched retail measure known as same-store sales. The company had cut prices on some popular toys and other holiday items as early as October, eager to revive growth after back-to-back months of disappointing sales in September and October. But Saturday's report suggested the early discounts were not enough to reverse the poor sales trend. GROWTH PREDICTION UNCHANGED The National Retail Federation trade group said it was leaving its holiday sales growth prediction unchanged at 5 percent, down from last year's 6.1 percent. Overall, sales momentum was a little slower heading into 2006 season. Last year, the United States was showing year-over-year growth of 7 to 10 percent, excluding auto sales, heading into the holiday season. This year is a different story, with growth rates of 2 to 5 percent. One economist said it appeared that shoppers took advantage of hefty discounts to buy big-ticket items for themselves, rather than as gifts, the opposite of last year's trend. Wayne Best, senior economist at Visa USA, said the two strongest growth categories on "Black Friday" -- retail's first holiday shopping day -- were furniture and home furnishings as well as electronics and appliances, where the average ticket price rose a higher-than-expected 9 percent. "Clearly that meant people were buying more items or more expensive items," he said. Visa is expected to release sales figures on Monday, but even without hard data, there's no denying that store traffic trounced many retailers' expectations. Chelsea Property Group Inc. opened 25 of its 36 outlet centers at midnight after Thanksgiving. Lines formed well before doors opened at the most popular stores including Gap Inc.'s (NYSE:GPS) Banana Republic and Gap, and Coach Inc.'s (NYSE:COH) outlet stores, said representative Michele Rothstein. "Because of so much excitement, we had people show up at centers we didn't even open (at midnight)," Rothstein said. "I was blown away," said Beth Ann Schroeder, Disney Store (Nasdaq:PLCE) division manager for the Northern New Jersey and New York area. "I think sales were higher and traffic was higher. The two definitely go together." (With reporting by Emily Kaiser in Chicago and Alexandria Sage in Los Angeles)
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