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Retailers counting on week after Christmas

Merchants are hoping sales and gift cards will boost reportedly soft holiday spending.

December 27, 2006|Leslie Earnest and Alana Semuels | Times Staff Writers

Retailers may not have gotten all they wanted for Christmas, but shoppers like Michael Green are giving them a second chance.

Green, a 51-year-old accountant from Santa Clarita, was stocking up on shoes and shirts at Nordstrom in the Glendale Galleria on Tuesday. The bill quickly exceeded the allowance on his gift card.

"I spent the $500 gift card I got yesterday," he said, "and then some."

That's music to the ears of merchants, who are hoping that shoppers lured by sales and fortified with gift cards will shore up a holiday shopping season that wasn't quite as jolly as expected, according to early reports.

Sales in the crucial Thanksgiving-to-Christmas period rose 6.6% over 2005, but that's below last year's increase of 8.7%, a unit of credit card giant MasterCard Inc. said Tuesday. (Both years benefited from an extra shopping day.)

Rival card company Visa USA had forecast a 7.5% bump for November and December, but on Tuesday it pared its projection to 6.5%. The company, which tracks only credit card activity, said that although sales picked up, it wasn't the surge that Visa had expected.

"We did have some hope that the last week leading to Christmas would really skyrocket in terms of additional sales," said Wayne Best, an economist at Visa.

There were several drags on consumer spending, Best said, including the housing slump, which made it harder for many people to support their buying habits by tapping home equity.

Gasoline prices also had an effect. Although fuel costs fell this fall, last week's national average of $2.341 a gallon was still 14 cents higher than a year earlier.

"If they're spending more to fill up their tank, they're spending less at the mall," Best said.

Another issue was the unusually warm weather on the East Coast and much of the country that made it tough for retailers to sell winter clothing, said Bill Kirk, chief executive of Weather Trends International in eastern Pennsylvania.

Last week, a storm that clobbered the Rocky Mountains and the Midwest and then worked its way east put a damper on last-minute shopping, according to MasterCard.

Several shoppers at the Glendale Galleria on Tuesday acknowledged spending less than they expected, although some of their reasons might be hard to categorize.

Barbara Wildermuth, 59, of Glendale said she simply didn't find as much "neat stuff" to buy.

Dan Shuford, a 60-year-old sod farmer from Bakersfield, said he and his wife didn't exchange presents because of a home improvement project.

"We're remodeling our house, and that's our gift to each other," he said.

Other shoppers complained that retailers were to blame for any shortfall in sales, pointing to stores lacking holiday trim and sales staff.

Samantha Cauero, a 21-year-old student at Cal State Northridge, said merchants were sold out of the ride-in toy cars that she had planned to give her nephews. And shoe stores didn't have the black high heels she was seeking to complete her outfit for New Year's Eve, she said.

The Sunland resident wound up purchasing gift cards for family and friends to avoid the hassle of searching for hard-to-find items.

Poor customer service was a frequent complaint this holiday shopping season, said America's Research Group in Charleston, S.C., which polls consumers throughout the season.

Another beef was that prices weren't low enough, said Britt Beemer, chairman of the research firm.

Of those queried a week before Christmas who had not yet completed their shopping, 48% said they were waiting for prices to be slashed in half, or lower, Beemer said. When questioned Saturday, that group reported spending 20% less than they had expected because prices hadn't fallen as much as they would have liked.

According to Visa, sales were softer than expected at department and discount stores, and at shops selling clothes, sporting goods, books and music.

Electronics sales were strong, and online sales appeared to be "very strong," Visa's Best said, partly because retailers made deals with shippers such as United Parcel Service Inc. and FedEx Corp. that allowed shoppers to make online purchases later in the season.

Holiday sales are particularly important for retailers, who generally collect 20% to 40% of their annual revenues in the months of November and December. They're also a major economic indicator because consumer spending accounts for about 70% of the nation's economy.

More information about how the season is playing out will be revealed today when the International Council of Shopping Centers releases its latest weekly report. Michael Niemira, the trade group's chief economist, had cut his combined November-December forecast for sales growth at stores open a year or more from 3% to 2.5%.

A more comprehensive reading will come Jan. 4 when retailers release December sales data.

The National Retail Federation, which uses a broader measure when tracking sales, said Tuesday that it was sticking with its prediction that sales would rise 5% to $457.4 billion, compared with a 6.1% increase in 2005.

Trying to get a read on the season can be difficult when information is flowing in from a variety of sources that track different categories of spending and use different measurement techniques, federation spokesman Scott Krugman said.

"It's premature to call the holiday season before this week is over," he said. "The week after Christmas is one of the most important shopping periods there is when it comes to holiday sales."

*

leslie.earnest@latimes.com

alana.semuels@latimes.com

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