Holiday Sales: Bumpy Ride for General Retail, Bookstores
By several measures, general retail sales barely rose during the holiday season. RetailMetrics said sales in December at stores open at least a year were up 0.4% compared to a 3.2% gain in December 2006, while the International Council of Shopping Centers said comp-store sales rose 0.9%.
Rupert Murdoch's Wall Street Journal took a positive approach to the news, writing that although this was the worst holiday season in five years, "a sales gain for the industry as a whole in December--albeit slight--lent some reassurance that consumers continue to spend." By contrast, the New York Times reported that the season "ended dismally for most retailers, whose sales tumbled despite deep discounts and extended store hours, stoking fears that the economy is tipping into a recession."
Ellen Zentner of the Bank of Tokyo-Misubishi told the Times that sales results "showed that the U.S. economy absolutely tanked in December. Consumer spending drives the economy. What we're left with is no evidence of any kind of consumer momentum going into 2008."
On the other hand, Stephen J. Hock, a professor at the University of Pennsylvania's Wharton School, told the Journal that the season was "generally a bit weak, but the sky is not falling." He added that consumer spending "will hang in there."
Wal-Mart and Costco were among the few gainers, which was attributed to their low prices. The companies' December comp-store sales rose 2.4% and 5%, respectively. Most other major retailers reported losses, including Macy's, down 7.9%; Penney, off 7.5%; Kohl's, down 11.4%. Results for the November-December period were somewhat better at most stores, but still were not as high as sales gains in recent years.
Even luxury stores or stores like Target that draw higher-income consumers felt the draft. Saks, whose comp-store sales were up 0.8% in December, noted that "its well-heeled customers were holding out for discounts," as the Times put it. And John D. Morris of Wachovia Securities commented: "Trading down became contagious."
December comp-stores sales at Nordstrom fell 4%; Target fell 5%; Neiman Marcus was up 2.9%.
Barnes & Noble, Borders Group and Books-A-Million offered holiday sales reports with mixed news. At B&N, comp-store sales fell, and the company had to revise earnings downward, leading to a 19.1% drop in its stock price. In Borders's case, comp-store sales rose 2.4%, a healthy figure this season, but profits were hurt by discounting. BAM had flat comp-store sales. Still, book sales at the trio were relatively solid.
During the nine weeks ended January 5, sales at B&N were $1.2 billion, up 4.1% over the same period a year earlier. Sales at stores open at least a year fell 0.4%, dragged down by music sales that were "significantly below forecast." Comp-store sales of books and other non-music products rose 0.8% during the period. At B&N.com sales rose 10.9% to $129.4 million.
Because of the holiday results and "January sales trends to date," the company reduced its expectations for earnings for the year by 10 cents a share, from a range of $1.91-$2.09 a share to $1.81-$1.99 per share.
Wall Street responded harshly. On an up day for the market, B&N closed at $27.91, down 19.1%, on five times the usual trading volume.
At Borders, sales in the nine weeks ended January 5 rose 3.9% to $1.1 billion. Sales at U.S. Borders superstores rose 6.5% over the same period last year, and sales at U.S. superstores open at least a year rose 2.4% because of increases in "both customer transaction count and average ticket." Comp-store book sales rose 3.4%, cafe sales were up 16.7%, gifts and stationery rose 10%, but, as with B&N, music sales fell, in Borders's case, 12.9%. Excluding music sales, comp-store sales at U.S. superstores rose 4.3%.
Overall sales at Waldenbooks Specialty Retail, which includes Borders Express, fell 15.6% to $192.2 million, reflecting the closing of 136 Walden stores during 2007. The division's comp-store sales rose 0.2%.
International sales rose 36.3% to $109.3 million. Comp-store international sales were up 10.8%, mainly because of "strong performance" in Australia.
In a statement, CEO George Jones said, "We delivered on our promise to improve comp-store sales performance this holiday season compared to last year in all of our business segments. Through effective use of our now 23.5-million-member Borders Rewards loyalty program, we increased traffic at superstores and continued the positive sales trends experienced during the previous two quarters. Still, the overall holiday shopping environment was intensely promotional and impacted the bottom line more than we anticipated."
Borders closed at $10.18 a share, up 3.9% in double the average volume.
Sales at Books-A-Million in the nine weeks ended January 5 rose 5.3% to $130.8 million and sales at stores open a year were flat.
In a statement, BAM president and CEO Sandra B. Cochran said, "The sales environment for the holiday season proved challenging as we confronted softening economic conditions and a value-conscious consumer. Nonetheless, we saw good results in a number of our core book categories as well as strong performances in bargain books and the gift department. Bestsellers for the season included James Patterson's Double Cross, Tony Dungy's Quiet Strength, Glenn Beck's Inconvenient Book and Jan Karon's Home to Holly Springs."