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Wednesday, Dec 6, 2023

Discount Strategy Wins Holiday Race

It wasn’t exactly a holiday season fit for Scrooge, but it didn’t hurt when retailers kept the stingy at heart in mind. Although the final results of holiday sales have yet to be tallied, indications are that the retailers who planned for aggressive discounting going into the season were the biggest winners. They were able to attract customers early and keep their margins healthy. But many of those who didn’t, changed course midstream, and at least some of those stores are likely to find coal in their earnings stockings when financials are reported later this month. “I think in some cases, there was a lot of discounting, and that has been responsible for pushing sales up,” said Aubie Goldenberg, partner for the retail group at Ernst & Young. “There were some people who got concerned about inventory levels and got a little more aggressive. There were others where discounting was part of the plan, and we shouldn’t see any profit surprises.” Overall, December chain store sales rose 3.2 percent over last year, according to the International Council of Shopping Centers, a level that was in line with the low end of estimates going into the holiday season. And some retailers posted especially strong numbers. Among them, December sales at Circuit City Stores Inc. rose 12.1 percent and 11.1 percent on a comparable store basis; and American Eagle Outfitters reported same store sales increased 9.8 percent for the month of December. But by and large, sales came to those who offered deals, and shopping patterns reflected consumers’ bargain-minded behavior. Already, several retailers have warned that when all is said and done, holiday sales will be weaker than anticipated. Kohl’s Corp. lowered its fourth quarter profit outlook noting that sales for November and December sales combined came in below plan. Cache Inc. , a specialty retailer, said its quarterly profit would likely come in at the low end of its earlier projections, a range of $0.46 to $0.48 per share, due to what the company called “higher than anticipated promotions.” Ann Taylor Stores Corp. reported December sales at its Ann Taylor division increased a mere 1.5 percent, a performance store executives called “somewhat lower than expected.” Wal-Mart Stores Inc. said December sales for Wal-Mart stores open at least a year rose 2.8 percent and told analysts that net earnings for the fourth quarter would come in near the low end of its previous guidance. Local retailers and shopping centers reported that traffic spiked during the Thanksgiving weekend, but fell off precipitously for the next two weeks. What results retailers posted, by and large, came in the last two weeks prior to Dec. 25. “Holiday was very strange this year,” said Jeff D. Paige, store manager for J.C. Penney in Glendale. “Thanksgiving was wonderful and the first two weeks of December were slow. Then the last two weeks were bigger than I ever thought they would be, so we beat the plan both at Northridge and at Glendale.” Many retailers advertised and offered aggressive promotions over the Thanksgiving holiday and shoppers took advantage of the deals. But when the promotional hubbub subsided, so did attendance at the malls. “Sales drove a lot of the traffic and the timing of the traffic,” said Rick Forster, senior general manager at Northridge Fashion Center. “I think generally everybody had a pretty good season, not double digit increases, but they did experience increases, and it came together at the end (of the season).” Glendale Galleria reported similar sales patterns, with the retailers offering the best promotions seeing the earliest traffic and sales. “Customers really didn’t take advantage of purchasing until the last two weeks of Christmas,” said Janet LaFevre, senior marketing director at Glendale Galleria. “That’s exclusive of retailers that were running promotions and had great deals going on. Those that had bargains did great early sales. Those that didn’t had sales in the last two weeks.” This season, apparel took a back seat to electronics. At Glendale Galleria, packaged gifts pumped up sales. “Anything packaged was blowing out the door,” said LaFevre. With most retailers vying for customers’ attention with promotional offerings, shoppers were scrutinizing the merchandise along with the pricing. “It’s been more competitive this year in Southern California than I’ve ever seen it,” said Paige. “We were all very, very competitive. Nobody seemed to be smarter than the other one where last year I thought we were smarter.”

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