Holiday Sales Defy Analysts’ Expectations

By Cara Woudenberg, Online Editor

Profits from the holiday retail season were not as low as many economists feared they would be. Although sales fell in the last retail week of 2001, and analysts predicted in early January that the final count would make it the worst retail holiday season in a decade, the Associated Press reported a week later that last-minute retail shoppers saved retailers from disaster. Still, the combined November-December period only registered a 2.2 percent gain, retail’s worst holiday performance since 1995.

Value-oriented chains such as Wal-Mart and Dollar General Corp. were clear winners over department stores, posting impressive sales gains in the high single digits. One exception was K-Mart, which experienced negative sales momentum in the latter part of 2001. The chain faced fierce competition from Wal-Mart and Target stores. By mid-January, shares in K-Mart plummeted to a 36-year low, and bankruptcy fears mounted after Standard & Poor’s dropped it from its S & P 500 index.

With apparel being one of the worst-hit sectors, a bright spot in the retail season was jewelers. Both Zale Corp., the country’s largest specialty jeweler, and Tiffany & Co., a high-end jeweler and gift retailer, showed signs of recovery in the luxury goods sector, which has been one of the worst-hit areas since the attacks of September 11.

Zale reported that sales rose 3.6 percent in November and December, and Tiffany reported sales were down 2 percent, a much smaller margin than had been predicted. Both stores had modified their product offerings in an attempt to appeal to more buyers. Last year Zale began to focus more on wedding and engagement rings and on the improvement of its merchandise. With consumers shying away from the luxury goods found at Tiffany in the $10,000 to $25,000 range, the store began to offer lower-priced items to help draw more traffic.

Although the retail season was better than most analysts predicted, last-minute gains for most retailers were the result of deep discounting, which is expected to hurt fourth-quarter profits for some companies. And many observers still believe that that will be no upswing in consumer spending until later in the year.