December '05 Sales Solid, January '06 Sales Could Be Hot

Retailers turned in solid sales reports for the Holiday season, but indications point to a ripple effect in January, when consumers return to shop with gift cards in hand.

According to the New York–based International Council of Shopping Centers, demand for gift cards skyrocketed in the 2005 Christmas season. The gift cards are expected to compose more than an estimated 15 percent of 2005 Holiday purchases. It’s equivalent to a dollar amount of more than $35 billion, and an estimated 30 percent to 60 percent of those gift cards are expected to be redeemed in January.

If December sales are any indication, luxury stores might get a sizable chunk of that business. While December sales for the retail sector increased 3.2 percent over the previous year, according to the ICSC, sales at luxury stores grew 6.4 percent for the month.

Sales at wholesale clubs grew 5.2 percent, department stores grew 3.3 percent, discount stores grew 2.6 percent, and apparel chain stores grew 1.5 percent. One of the highest performing specialty retail stores was The Wet Seal, based in Foothill Ranch, Calif. The company’s comparable sales for December grew 38.5 percent over the same time in the previous year. Same-store sales for Zumiez, an activewear specialty chain based in Everett, Wash., grew 20.9 percent.

But the Holidays did not treat Pacific Sunwear well. With more than 1,000 stores across America, it’s one of the dominant retailers in the juniors and activewear markets. But the Anaheim, Calif.–based retailer reported anaemic same-store sales of 1.1 percent. Jeffrey Van Sinderen, an analyst with Los Angeles–based B. Riley & Co., said December was not a bad month for the company because their merchandising numbers were up. All the same, the comparable store sales were a surprise to him.

“Their strategy was not to be promotional, but their competitors, such as Aeropostale, American Eagle, and Charlotte Russe, were very promotional. You probably had people who would rather buy the Volcom [clothes] at Pacific Sunwear, but they saw discounts at Aeropostale and opted to buy there.”

Hot Topic reported a decline in same-store sales of 6.2 percent for December. The decrease led Betsey McLaughlin, the chief executive of the City of Industry, Calif.–based company, to revise earnings for the 4th quarter. She wrote in a Jan. 4 company statement that the revised guidance should report a comparable store sales decline in the mid-single digit range for the quarter.

Yet Hot Topic may be on the road to recovery according to retail analyst Liz Pierce of Sanders Morris Harris. She wrote in a Jan. 5 research note that Maria Comfort, Hot Topic’s chief merchandise officer, who was hired in August, was making good choices on the sales floor, and that Hot Topic’s women’s apparel business grew 3 percent in December. —Andrew Asch