Luxury Retailers Must Have Been Good This Year

Holiday Sales Grow Just 3.2% as Wal-Mart, Other Discount Stores Struggle

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COLUMBUS, Ohio (AdAge.com) -- Retailers catering to the wealthy were the biggest holiday winners this year, while discounters-especially Wal-Mart-were hit hard by decreased spending by low-income consumers and unseasonably warm weather.

"Lower-income households were under strain, far more than upper-income households, where the job gains and income growth remain," said Frank Badillo, a senior economist at Columbus, Ohio-based research firm Retail Forward.

The flood of December sales results show that same-store sales overall were up just 3.2%, below the 3.6% registered in 2005, according to Retail Forward.

But the luxury-department-store channel beat those averages by a wide margin. Nordstrom reported a hefty 9% jump in same-store sales this December on sales of $1.2 billion. At Saks Fifth Avenue, same-store sales jumped a whopping 11.1% on sales of $444 million. Management pinned the gains on strong apparel sales-despite industry-wide softness in the category.

The department-store resurgence wasn't shared by chains catering to the less affluent. Federated Department Stores, in its first season with a national advertising campaign behind its Macy's banner, came in below forecasts with same-store sales of 4.4%, not the 5% to 8% expected by analysts. Overall sales fell 8.5% to $5 billion. At Kohl's, same-store sales came in at 3%. At JC Penney, same-store sales were 2.6%.

For Gap Inc., same-store sales declined 8% in December across the company's brands and 3,184 stores. The only positive same-store gain came from its Banana Republic division, which was up 2% compared with a 5% drop in 2005.

SOME OPTIMISM

Wal-Mart, after warning same-store sales could be as low as 1%, bettered the forecast at 1.3%, but it was still a poor showing compared to the 4.4% rise at rival Target Stores. Costco, which also caters to a high-income demographic, reported strong results, with same-store sales at 9% on sales of $7.2 billion in December, in part due to strong demand for its flat-panel TVs. Although far lower than Costco, Sam's Club, which launched its first national TV campaign during the holidays, saw same-store sales growth of 3.5% during December on sales of $4.8 billion, compared to 3.2% during the same period last year.

Despite the disappointing results overall, some industry analysts remain optimistic a surge in gift-card redemptions and a bout of cold weather could save some retailers. "The holiday season doesn't end in December anymore," said Phil Rist, a retail analyst at Big Research, a Columbus-based retail-research firm, which has projected $24.8 billion in gift cards were sold this year, compared to just $18.5 billion in 2005.
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