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Gift cards, cold give stores one last chance
2006-12-26
Colder weather and huge demand for gift cards should give retailers one last chance this week to make up for slack December sales growth, but it may be too little, too late to rescue fourth-quarter earnings. The weekend before Christmas, which typically includes the busiest shopping day of the year, did little to alleviate concerns that holiday spending would come up short of expectations. "Based on our channel checks, shoppers were out and they were buying, but not at the level we had expected, especially at many of the apparel driven retailers," Roth Capital Partners analyst Elizabeth Pierce wrote in a note to clients. "Although results were softer than we expected over the weekend, we believe it is premature to 'call' the holiday season given the increasing popularity of gift cards," she added. Retailers record revenue from gift cards when the cards are redeemed, not when they are sold. That can deflate traditional holiday season sales but lift results in late December and into January. Many retailers held back some winter merchandise so that they could show something new after Christmas, hoping that shoppers armed with gift cards would pay full price for items such as coats and sweaters -- two categories that have suffered through an unusually warm December. Planalytics, which tracks weather-related spending, predicted a gradual trend toward more seasonable winter weather through the first half of January. Holiday sales from the day after Thanksgiving through Christmas Eve grew about 3 percent, well behind last year's 5.2 percent growth rate, according to SpendingPulse, the retail data service provider for MasterCard Advisors. Holiday season sales rose 6.6 percent without adjusting for an extra sales day between Thanksgiving and Christmas, MasterCard's SpendingPulse said. "If MasterCard is calling 6.6 percent (growth) disappointing, we'll take disappointing every year," said Scott Krugman, spokesman for the National Retail Federation trade group, which expects holiday sales growth of about 5 percent. CLOTHES SHOPPING? Final December sales figures won't be released until next week, but apparel stores appeared to be among the biggest disappointments in the vital Thanksgiving-to-Christmas holiday season, and some chains have already slashed prices in a last-ditch effort to tempt shoppers. "From our checks days before Christmas, women's specialty retailers in most cases threw in the towel early," CIBC World Markets analyst Roxanne Meyer wrote in a note to clients on Tuesday. That could pressure fourth-quarter profits. December is the biggest earnings driver in the period, which for most retailers ends in January. CIBC's Meyer said apparel retailer Talbots Inc. began taking post-Christmas markdowns as early as December 18. Another clothing chain, Christopher & Banks Corp., said last week that fourth-quarter earnings would be lower than Wall Street analysts had expected. Analysts said demand for consumer electronics may have fizzled out last weekend after a strong start that was driven by demand for discounted flat-panel televisions. "Even typical holiday shopping procrastinators seemed fewer and further between, with parking lots of malls and strip malls relatively easy to navigate (as) opposed to typical jams," Kaufman Bros. analyst SooAnn Roberts wrote in a research note. Online sales remained strong, however, with Amazon.com Inc. reporting its busiest day of the holiday season on December 11. The retailer said it shipped more than 99 percent of orders in time to meet holiday deadlines worldwide. On the peak day, it shipped more than 3.4 million units.
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