Rush at End, but Sales Fall Short (NYTimes, 12/26/06)
December 26, 2006
Rush at End, but Sales Fall Short
By MICHAEL BARBARO
There is always next year.
Shoppers swarmed discount stores and mobbed suburban malls over the crucial holiday weekend, but the final burst of buying is expected to fall short of retailers’ expectations.
Visa USA, the credit card company, said yesterday that it would lower its closely watched forecast for holiday spending. Based on purchases by credit and debit card holders, Visa said sales rose 6.5 percent in November and December, compared with the same period last year, down from its initial forecast of a 7.5 percent gain.
The company’s unexpected downward revision — and the millions of dollars in lost sales it represents — could have broad implications for the nation’s merchants, who count on purchases during the holiday season for nearly half of their business.
For consumers, it will probably translate into even deeper discounts over the next week, as they begin redeeming millions of gift cards.
Industry analysts said that, after a strong, discount-induced start the day after Thanksgiving, consumer spending slowed in December and never fully recovered. A soft housing market and high fuel prices pinched consumer spending, while unseasonably warm temperatures damped sales of cold-weather clothing from New York to Chicago.
“We knew spending would be slower than last year,” said Wayne Best, senior vice president of economic analysis at Visa USA. “But it seems to be even slower than we predicted.”
The lackluster performance, well below the 8.3 percent increase in 2005, came despite respectable last-minute sales over the weekend.
ShopperTrak RCT, which measures purchases at 45,000 mall-based stores, said spending rose 22.5 percent on Friday and Saturday, compared with the same period last year, hitting $16.3 billion.
A founder of the research firm, Bill Martin, called it a “very strong close to the holiday shopping season.”
But it was probably not enough to prop up the entire season. Marshal Cohen, chief retail analyst at the NPD Group, an influential research firm, said retailers had handicapped themselves by dangling even deeper discounts this November than last — encouraging consumers to finish their shopping earlier than ever.
According to NPD, 40 percent of Americans had started shopping by Thanksgiving weekend. “That is a huge increase over the prior year,” Mr. Cohen said.
The early shopping theory was supported, in part, by data from ShopperTrak, which said consumers spend more on the day after Thanksgiving, known as Black Friday, than on any day leading up to Christmas. That is a reversal from previous years, when the Saturday before Christmas was the biggest shopping day of the year.
Retailers turned Black Friday into a fierce game of one-upmanship this season, with dozens of malls opening at midnight to compete with discount retailers, only to be outdone by CompUSA, which began ringing up sales at 9 p.m. on Thanksgiving.
Since then, Mr. Cohen said, customer traffic at the nation’s stores has slid.
Those who did shop spent less, according to Visa USA. From Dec. 1 to Dec. 24, it said, the cost of the average purchase dropped by 1 percent. When customers did splurge, it was on electronics, appliances and home furnishings — which emerged, to Visa’s surprise, as the single biggest area of growth this holiday season.
Data from Visa is considered a reliable gauge of the economy because $17 out of every $100 is spent on its 500 million cards. Like monthly retail sales reports from the Department of Commerce, Visa’s holiday forecast includes spending on gasoline, grocery stores and restaurants.
Faced with a so-so December, retailers did their best to drum up business this last weekend. Best Buy opened at 7 a.m. and dangled scores of Christmas Eve specials like a $229 L.C.D. television and 50 percent off all HBO DVDs.
Circuit City offered Sunday-only specials like a 5.1 megapixel digital camera for $80 and gave away $100 gift cards for every purchase of $1,000 or more.
Last-minute discounts lured Kim Clark to a Wal-Mart in Hamden, Conn., on Christmas Eve.
“It’s never too late,” said Ms. Clark, a 45-year-old mother, as she spent $89 on toys like an Aquadoodle Sing ’n Doodle, one of the season’s hottest preschool products.
“I just hope my bank does not prosecute,” she said.
To make up for disappointing pre-Christmas sales, stores are now focusing on those shoppers holding gift cards. Retailers like Coach and Bloomingdale’s are introducing dozens of new products this week to encourage shoppers to spend their gift cards before the year is over.
Wal-Mart, whose sales have lagged competitors all year, appealed directly to plastic-wielding shoppers in its circular yesterday: “Got a gift card?” it read. “Get your gift.”
Rush at End, but Sales Fall Short
By MICHAEL BARBARO
There is always next year.
Shoppers swarmed discount stores and mobbed suburban malls over the crucial holiday weekend, but the final burst of buying is expected to fall short of retailers’ expectations.
Visa USA, the credit card company, said yesterday that it would lower its closely watched forecast for holiday spending. Based on purchases by credit and debit card holders, Visa said sales rose 6.5 percent in November and December, compared with the same period last year, down from its initial forecast of a 7.5 percent gain.
The company’s unexpected downward revision — and the millions of dollars in lost sales it represents — could have broad implications for the nation’s merchants, who count on purchases during the holiday season for nearly half of their business.
For consumers, it will probably translate into even deeper discounts over the next week, as they begin redeeming millions of gift cards.
Industry analysts said that, after a strong, discount-induced start the day after Thanksgiving, consumer spending slowed in December and never fully recovered. A soft housing market and high fuel prices pinched consumer spending, while unseasonably warm temperatures damped sales of cold-weather clothing from New York to Chicago.
“We knew spending would be slower than last year,” said Wayne Best, senior vice president of economic analysis at Visa USA. “But it seems to be even slower than we predicted.”
The lackluster performance, well below the 8.3 percent increase in 2005, came despite respectable last-minute sales over the weekend.
ShopperTrak RCT, which measures purchases at 45,000 mall-based stores, said spending rose 22.5 percent on Friday and Saturday, compared with the same period last year, hitting $16.3 billion.
A founder of the research firm, Bill Martin, called it a “very strong close to the holiday shopping season.”
But it was probably not enough to prop up the entire season. Marshal Cohen, chief retail analyst at the NPD Group, an influential research firm, said retailers had handicapped themselves by dangling even deeper discounts this November than last — encouraging consumers to finish their shopping earlier than ever.
According to NPD, 40 percent of Americans had started shopping by Thanksgiving weekend. “That is a huge increase over the prior year,” Mr. Cohen said.
The early shopping theory was supported, in part, by data from ShopperTrak, which said consumers spend more on the day after Thanksgiving, known as Black Friday, than on any day leading up to Christmas. That is a reversal from previous years, when the Saturday before Christmas was the biggest shopping day of the year.
Retailers turned Black Friday into a fierce game of one-upmanship this season, with dozens of malls opening at midnight to compete with discount retailers, only to be outdone by CompUSA, which began ringing up sales at 9 p.m. on Thanksgiving.
Since then, Mr. Cohen said, customer traffic at the nation’s stores has slid.
Those who did shop spent less, according to Visa USA. From Dec. 1 to Dec. 24, it said, the cost of the average purchase dropped by 1 percent. When customers did splurge, it was on electronics, appliances and home furnishings — which emerged, to Visa’s surprise, as the single biggest area of growth this holiday season.
Data from Visa is considered a reliable gauge of the economy because $17 out of every $100 is spent on its 500 million cards. Like monthly retail sales reports from the Department of Commerce, Visa’s holiday forecast includes spending on gasoline, grocery stores and restaurants.
Faced with a so-so December, retailers did their best to drum up business this last weekend. Best Buy opened at 7 a.m. and dangled scores of Christmas Eve specials like a $229 L.C.D. television and 50 percent off all HBO DVDs.
Circuit City offered Sunday-only specials like a 5.1 megapixel digital camera for $80 and gave away $100 gift cards for every purchase of $1,000 or more.
Last-minute discounts lured Kim Clark to a Wal-Mart in Hamden, Conn., on Christmas Eve.
“It’s never too late,” said Ms. Clark, a 45-year-old mother, as she spent $89 on toys like an Aquadoodle Sing ’n Doodle, one of the season’s hottest preschool products.
“I just hope my bank does not prosecute,” she said.
To make up for disappointing pre-Christmas sales, stores are now focusing on those shoppers holding gift cards. Retailers like Coach and Bloomingdale’s are introducing dozens of new products this week to encourage shoppers to spend their gift cards before the year is over.
Wal-Mart, whose sales have lagged competitors all year, appealed directly to plastic-wielding shoppers in its circular yesterday: “Got a gift card?” it read. “Get your gift.”
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