Strong Start for Holiday Season

Holiday sales started on a blockbuster note, but will this winner’s streak last throughout the entire Holiday season?

Economist Jack Kyser of the Los Angeles County Economic Development Corp. said Christmas 2004 should be one of the merriest on record but consumer traffic and buying may not be as consistently busy as it was on the Friday after Thanksgiving, dubbed “Black Friday” and considered by many to be the start of the Holiday sales season. The term refers to the fact that many retailers become profitable on this date, seeing their accounts shift from being in the red to being in the black.

“We have to approach Black Friday in a new way; it’s become its own special event,” Kyser said. “It was a bang-up day, but what’s going to happen the day after and the day after that? We have to wait until it all plays out.”

But Kyser said he expects Southern California’s Holiday will be merrier than the rest of the nation’s. The region is currently benefiting from hiring in the aerospace and motion picture industries and is not worrying about the high price of heating oil. The upbeat economy led Kyser to forecast that the area’s retail sales will increase 8 percent this season, almost double the Washington, D.C.–based National Retail Federation forecast, which says that retail sales will increase 4.5 percent.

No region-wide forecast was available for the San Francisco Bay area, but anecdotal information from interviews found that parking garages were packed with shoppers’ cars in places such as Union Square, the heart of San Francisco’s downtown retail district. But no one in the area is banking on Thanksgiving sales setting the tone for the rest of the season, said Randall Harris, executive director of trade group San Francisco Fashion Industries.

“Thanksgiving isn’t the best indication for the Holiday season because consumers are blitzed with sales and promotions,” he said.

“But people appear to be spending, and retailers are happy.”

More than 133 million shoppers across the United States swarmed retailers on Thanksgiving weekend, exceeding the NRF’s original forecast of 130 million. An NRF survey conducted by BIGresearch LLC, based in Worthington, Ohio, found that the average shopper spent $265.15 during the weekend, bringing total weekend spending to $22.8 billion, more than 10 percent of the $220 billion the NRF expects in total Holiday sales this year.

San Francisco–based Visa USA, the world’s largest payment system, said purchases made with Visa-branded payment cards on Black Friday jumped 15.5 percent over last year to more than $4.1 billion.

Other analysts, however, detected a soft side to the early Holiday sales. Michael Niemira, chief economist for the New York–based International Conference of Shopping Centers, found that sales in the United States slipped 1.5 percent for the week of Nov. 27, compared with the powerhouse sales of the same week last year. As a result of this weakness, the ICSC lowered its sales expectations for November to only a 2.5 percent increase.

Retail analyst Liz Pierce, who works for the Los Angeles office of the Sanders Morris Harris Group Inc., said she believed the softness in sales could result in a tepid first two weeks of December.

“An early Hanukkah certainly provides a sales catalyst,” she wrote in a research note. “But we expect sales to be moderate until the final week before Christmas, as consumers wait for prices to come down.”

Pierce also forecast total Holiday sales will increase 4 percent over last year.

Most analysts said that this Holiday should be a good one for apparel manufacturers and retailers. Although electronics are expected to be the gifts of choice this season, NRF’s Black Friday survey found that 49 percent of consumers purchased apparel as gifts.

Cool temperatures during the end of November also came to the rescue of the apparel business. People bought clothes that will help them bundle up, albeit fashionably, according to Laurel Crary, general manager of the Beverly Center, an upscale mall based in Los Angeles. “Fur—period—is making a comeback,” Crary said.

She also said that vibrantly colored clothes—in deep greens, warm chocolates and robust jewel tones—are selling well along with sequined apparel and shoes.

Kelly Cole, vice president of the Neiman Marcus department store in Newport Beach, Calif.–based Fashion Island, noticed cashmere sweaters were selling well. Men’s formalwear, including velvet jackets by Dolce & Gabbana and Armani, were top picks. Tweed was popular, especially in women’s clothing, said Debra Gunn Downing, executive director of marketing for the South Coast Plaza, based in Costa Mesa, Calif.

Luxury Holiday

Holiday sales will most likely echo one of the major retail trends this year: Luxury items will probably sell well, while value and discount retailers such as Wal-Mart Stores Inc., based in Bentonville, Ark., will experience trouble.

“We think the affluent consumer will drive Christmas spending this year,” said Aubie Goldenberg, a retail analyst with the Ernst & Young office in Los Angeles’ Century City. He said he believed retail sales will increase more than 6 percent nationally over last year.

The lure of luxury is so strong that even Hayward, Calif.–based Mervyn’s, a retailer with popular price points, expects its best-selling items to have a chi-chi edge, said company spokesperson Katie Winter. She forecast top sellers will be anything soft and luxurious, including faux furs and wraps with satin bows.

Lackluster Holiday sales for Wal-Mart, which reported 0.7 percent comparable sales for November, illustrated the troubles of the discount sector, said Mike Blatt, assistant vice president at the Chemung Canal Trust Co., based in Elmira, N.Y. But Wal-Mart may still have time to put a little cheer into its Holiday, he said.

“If they do a better job of getting the word out on some of their discounts, maybe they’ll improve their numbers,” he said. “But the deep discounters are going to have a rough fourth quarter.”

Holiday promotions

The blockbuster Black Friday was in part created because retailers did a fantastic job of drawing traffic with promotions and events.

The South Coast Plaza started the Holiday season during the first week of November by offering the Angelitos Card, which gave customers a 20 percent discount off goods at 120 of the center’s luxury retailers and raised $86,650 for Big Brothers Big Sisters of Orange County.

The Glendale Galleria, based in Glendale, Calif., introduced its own debit card in early November.

The Hollywood & Highland shopping center in Hollywood kicked off its Holiday season on Nov. 15 with the introduction of the VIP Card, which offered discounts and freebies to visitors. Annette Bethers, marketing vice president, said more than 1,500 people enrolled in the program the first week. The card and the November store openings of Lucky Brand Jeans, BCBG Max Azria and American Eagle allowed the center to forecast a 10 percent increase in Holiday sales over last year.

Goldenberg said the holidays should continue to fall earlier on the calendar in upcoming years.

“If a number of retailers looked out and saw that some of their competitors had done this successfully, they’d say, ’We’d better do this—otherwise, it’s a lost opportunity,’” he said. “It’s becoming a more prevalent practice.”