Retailers Face Worst Holiday in 30 Years
Tuesday December 24, 2002 1:20 PM EST
By Emily Kaiser

CHICAGO (Reuters) - U.S. retailers, reeling from a lackluster holiday season that is forecast to be the weakest in more than 30 years, may ring in the new year with steep markdowns on clothing, accessories -- and profit forecasts.

Analysts cut earnings estimates for retailers ranging from sector leader Wal-Mart Stores Inc. to upscale jeweler Tiffany & Co. Inc. on Tuesday, a day after major chain stores reported another week of tepid sales in what was supposed to be the biggest shopping period of the year.

In a weekly report on Tuesday, the Bank of Tokyo-Mitsubishiand UBS Warburg forecast holiday sales in November and December would be up an anemic 1.5 percent over last year, the smallest gain since the banks began tracking weekly sales in 1970.

That's a far cry from the 4 percent rise forecast by the National Retail Federation, although the trade group still believes its target is reachable. The NRF looks at total holiday sales when calculating its forecast, while others including BTM/UBSW focus on sales only at large chains.

"What's going to be crucial now is the week after Christmas," said NRF spokesman Scott Krugman. "We're going to have a week of gift certificate redemptions, we're going to have some returns and exchanges and new purchases as retailers are busy clearing out merchandise. We just might squeak by with this 4 percent estimate after all."

LAST-MINUTE SHOPPERS

Malls opened as early as 7 a.m. on Tuesday in hopes of catching one last batch of shoppers with big markdowns. Bankrupt discount retailer Kmart Corp. was keeping stores open for 110 hours straight through Tuesday evening.

Constance Hege, a flight attendant for Dutch airline KLM who was stocking up on Performance Fleece pullovers at an Old Navy store in Manhattan, said she planned to spend as much this year as last year, but her money was stretching further as retailers took hefty discounts.

A saleswoman at a nearby Gap said her store had long since sold out of striped scarves that feature prominently in the retailer's national advertising campaigns. She said sweaters marked down to $29.99 from $48 were selling well on Tuesday. In Miami, where the Christmas Eve temperature was around 80 degrees Fahrenheit, shirt-sleeved shoppers flocked to Dadeland Mall, one of the region's largest shopping centers.

"It's best to get out of here before the crowds move in in the afternoon," said Gisela Cacciamani, a 48-year-old realtor, buying a baseball cap at a novelty store. She planned to spend less this year, saying the economy felt less sure.

In suburban Chicago, Tom Kotsos said he waited until the last minute to finish holiday shopping because he couldn't get the time off work, but he spent more than last year.

"I was worried about my Christmas bonus. I ended up getting more stock options than money, but I'm just happy to have my job," he said, holding a Tiffany bag.

The BTM/UBSW report showed chain store sales rose 0.1 percent in the week ended Dec. 21 -- the busiest shopping day of the year -- from the prior week.

A separate report from Instinet Research showed sales at major U.S. chain stores inched up 0.2 percent in the three weeks ended Dec. 21, compared with the same period last month.

The Standard & Poor's retailing index has slumped 13 percent since Dec. 2, when several major retailers stoked expectations by reporting record demand over the Thanksgiving weekend. The broader S&P 500 index has lost just 6 percent in that time.

The S&P retailing index closed at 262.84, down 0.6 percent, after a holiday-shortened trading session on Tuesday.

Sales stalled after the strong Thanksgiving start, and many retailers have since posted disappointing numbers.

Toy retailer FAO Inc. is among the biggest casualties of the holiday season, saying on Monday it would close nearly a quarter of its 253 stores as it struggles to avoid filing for bankruptcy.

TARGET MISSES TARGET

Target Corp. (TGT) tops many analysts' lists of retailers likely to miss sales goals this month, and although lean inventories will keep markdowns to a minimum and insulate profits, the retailer's earnings may be at risk.

Emme Kozloff, an analyst with Sanford Bernstein, lowered her fourth-quarter earnings estimate for Target to 74 cents a share from 76 cents, putting it 2 cents below the consensus of analysts polled by research firm Thomson First Call.

Goldman Sachs analyst George Strachan cut his earnings estimates on top retailers including Wal-Mart and Federated Department Stores Inc. (FD), the parent of Macy's and Bloomingdale's, a day after they gave weak sales updates.

"The bottom line is, the (holiday sales) performance is likely to be the weakest on record," said Michael Niemira, retail analyst with Bank of Tokyo-Mitsubishi.

© 2002 Reuters Limited.