The holiday shopping period has officially kicked off with an anti-climactic whimper as warmer-than-usual weather and heedful holiday shoppers were the Grinches that quashed the expectations of optimistic  retailers. After growth of 0.1% and 2.3% (inflated by easy 2008 comparisons) in September and October, respectively, November comps dipped 0.3% despite a late boost from a relatively strong Black Friday. Despite easy comparisons to a soft November 2008, about three-quarters of publicly-traded retailers missed estimates — making December all the more crucial for a market still hoping to fulfill holiday expectations.

According to the International Council of Shopping Centers, which tracks 32 retail-chain stores, excluding Walmart, the tail-end of the month saw strength from electronics and online spending, but was partially offset by weakness in some in-store performance and apparel demand.

Analysts, who expected same-store sales growth between 2% to 7%, said the lower-than-expected sales were likely a result of several factors, including an overly selective consumer market and the warmest November in eight years. 

Likewise, increased store traffic from a year ago didn’t translate to higher ticket items, forcing the painful realization that consumers are waiting until retailers slash prices even more as Christmas approaches. As a result, merchants may find themselves in a tailspin reminiscent of 2008 — where they will be forced to make sometimes-absurd price cuts to move inventory off the floor.

Things weren’t all bad, however, as the ISCS reported discounters and wholesalers posted moderate growth as consumer continue to seek out bargains. Warehouse clubs Costco and BJ’s Wholesale continued to flex their muscles amidst a down economy, posting growth of 6.0% and 1.0%, respectively — but both were still below most analysts' forecasts. Costco missed expectations despite results that were boosted by higher fuel prices and strengthening foreign currencies.                       

Among sporting goods stores, many merchants said its tough to figure out how the holiday will turn out since unseasonably weather clearly played a role in disappointing sales of cold-weather gear.

“Weather has not been favorable so sales have been soft in all the cold weather areas,” said one head buyer at a full-line sporting goods chain in a conversation with Sports Executive Weekly. This was offset by a good recovery in fitness sales and continued strong sales in the hunting areas. Although the increases are less then the strong comps in hunting last year, these areas continue to provide positive comps.”

Although the buyer said Black Friday has never been a good indicator of sales trends for the Holiday season, his chain performed well over Black Friday weekend. “Our sales were up for Friday and the weekend which we view as positive since customers continued to shop after the big value day,” said the buyer.

But that merchant said that it appears the holiday season will greatly depend on the amount of cold weather and snow in the markets where his stores are located.  “If we get similar to last year December, we will be up low- to mid-single digits. If not, flat to down 2%,” the buyer said.

Alan Blume, owner of Vertical Drop Ski and Snowboard in St. Charles, IL, admits the warm weather has been crippling his business.
“We are very weather-driven in the Ohio River Valley and to-date our temperatures have been well above normal,” said Blume. “I'm not sure we can make up our double-digit losses in November. I look for very soft consumer Holiday season spending. Let it snow, let it snow, let it snow!”

But some were at least optimistic about their start to the holiday selling period.

“We were very pleased with our Black Friday business,” said Ed Rix, vice president of advertising at MC Sports, based on Grand Rapids, MI. “We exceeded our expectations and were encouraged by improvement in our fitness business. Customers were definitely shopping the deals, but we expected that and we planned accordingly.”

He also believes customers continue to be “deal driven;” they are definitely buying when the value is there. “Our merchants worked hard to bring our customers some incredible deals in just about every category and it's paying off so far,” said Rix. Like the other retailers, however, he said the holiday's success will greatly depend on the weather.

“We remain very optimistic regarding the weeks to come,” said Rix. “For us, it's about weather. We need snow and cold. If mother nature cooperates, this should be a pretty good December.”

“Black Friday was good,” said Mitchell Modell, CEO of Modell's Sporting Goods. “The customer was cherry picking the special buys as usual. Like you hear from everyone else, the holiday is going to be tough. The key is keeping inventories in line and if we get a good break of cold weather and get a little luck with good team, we'll do okay.”

One benefit coming to Modell's is the anticipated strong sales of Yankee merchandise. “We see Yankees selling right through the holiday season,” said Modell.                                                                     

Randy Ruch, CEO of Schuylkill Valley Sports, which has 17 locations in Eastern Pennsylvania as well as one in New Jersey, said he remains “cautiously optimistic” regarding the holiday outlook.  “Our numbers do not look good because we are going against the Philadelphia Phillies championship last year. Other than that, things are fine,” said Ruch. “We are cutting expenses and slicing inventory. In these most unique times, we will come through fine.”

Larry Whiteley, Bass Pro's corporate public relations manager, said the outdoor chain had a strong Black Friday weekend and has remained steadily healthy so far.  “We were very pleased,” said Whitely. “The crowds in the stores have been tremendous.”

Black Friday traffic was supported by the continuation of the Great Turkey Campout in which customers were offered s’mores cooked on an open campfire, hot chocolate and coffee on Thanksgiving night. There were also a number of drawings for camping gear and gift cards. Customers were then allowed to pitch tents in their parking lot on Thanksgiving night before the early bird specials. But Whitely said traffic has remained strong after Black Friday in large part due to the response to Bass Pro's Santa Wonderland attraction, now in its second year. “Families are looking for it now,” said Whiteley. “They get a free picture with Santa on us. It's bringing people to the stores.”

He also said Bass Pro has been performing well this year considering the economy as its core outdoor categories have barely been hurt in the recession. “They may not buy a boat or travel but our type customer is still going to hunt, camp, and fish,” said Whitely. “It's not that expensive to do and helps get your mind off the economy. They're still coming in.”

At See Jane Run, the women's-only athletic store with locations in Danville, CA, San Francisco, Oakland, and Boise, ID, holiday selling picked up after a slow start to November and has benefited from more web marketing.

“We have focused on short and lucrative promotions to drive people in our stores and online,” said Deb DeFanti, See Jane Run's director of marketing. “Social media networks are a must which keeps our marketing costs down and allows us to pass on the discount to our customers. Since Black Friday, we are up about 40% this year. Last year we focused more on in-store elements and didn't see the returns.”
But an owner of a Midwest soccer store said he remains “very skeptical” of any significant recovery in the near future. “Sales seem to have stabilized but we are not seeing any major improvement,” the owner said.

Some vendors responding to questions about their Holiday outlook also continued to see a slow recovery although many were pleased that  at least business had stabilized.

“We will have a long arduous road ahead together and major peaks and valleys are probably gone for a while,” said Bob Puccini, president, Mizuno USA. “Recovery will be long and slow, but reasonably “sane.”
Tyson Andrus, senior executive manager, product development at Skullcandy, the headphones company focused on the action sports market, said that while retailers in 2008 were “pretty skittish about placing any big orders in advance of Black Friday” due to all the economic uncertainty, ordering trends have improved.

“This year feels a bit less tenuous then last and orders have been strong going into December,” said Andrus. “While Black Friday wasn't stellar, we're seeing replenishment orders already that indicate we'll still be ending the year strong.”

One executive at a major footwear chain also believes the crucial shopping days still lie ahead.

“We had the type of Black Friday we've seen in prior years,” the exec said. “You get the big spike and then as expected sales on Saturday were nowhere near where they were on Friday. Now we'll wait for the next big spike that comes right before you get to Christmas.”

Looking at the broader market for November, discounters Kohl’s (+3.3%), Ross Stores (+8.0%) and the TJX Cos. (+8.0%) sustained growth as price-savvy consumers continued their assault on deeply-discounted designer labels. At Kohl’s, which heftily exceeded analysts forecasts and has posted comp growth for five straight months, President and CEO Kevin Mansell said the company saw a 10% increase in transactions for November, further indicating that Kohl’s has achieved an optimal balance of value and quality.

At Ross, strong November sales of shoes and dress items and strength from the Southwest and Northwest regions boosted sales nearly two percentage points above analysts’ expectations.

Trendy discounter Target continued to struggle as consumers opted for deeper apparel and footwear discounts at “bargain bin” chains. Representatives said strong sales of consumer electronics, toys and apparel, as well as household goods, small appliances and beauty had boosted results on top of a strong holiday weekend, but soft sales in the first three weeks of November were too much to overcome. Target comps slid 1.5% in November, more than the 0.5% decline forecasted by analysts.

As expected, things weren’t so rosy for department stores and teen retailers for the month, where comps declined 4.5% and 5.5%, respectively. For department stores, Nordstrom, which traditionally offers a wider range of price points than competitors like Macy’s and Saks, continued to break the luxury mold, posting commendable comps growth of 2.2% after 6.5% growth in October.                                   

Nordstrom was the lone bright spot within the luxury sector as Neiman Marcus (-5.9%) and Saks (-26.1%) continued to struggle to move high price points. Saks, which managed to fall below analysts’ predictions of a decline of 20.8%, was deeply affected by tough 2008 comparisons and the shift of a designer clearance event from the year-ago period.
JC Penney saw month-over-month comps slip to a decline of 5.9% compared to a decline of 4.5% in October, while Stage Stores whiffed on forecasts, posting a 12.5% decline after analysts expected a decline of about 5.3%. Macy’s posted a 6.1% decrease for the month.

At teen retailers, Aeropostale and The Buckle continued to be the lone bright spots, posting comp growth of 7.0% and 1.4%, respectively – albeit still missing estimates. Abercrombie & Fitch — despite attempts to revive business with complimentary gift card promotions — heftily missed expectations by posting November comps that were off 17.0%. Abercrombie continued to experience significant challenges from its fast-fading Hollister brand, which reported a 23% comp sales decline for the month. Gap Inc. reported flat November comps as strength from its Old Navy North America brand (+6%) offset weakness in its Banana Republic NA (-4%) and Gap NA (-4%).

Looking ahead, the ISCS anticipates that same-store sales will rise by 2% to 3 % in December as consumers complete more of the holiday shopping later than last year and confirmed its original Holiday season forecast calling for about 1% growth.

In related news, a report recently issued by the Labor Department indicated that the unemployment rate fell to 10% in November – a pleasant surprise to many experts who expected it to remain constant with the rate of 10.2% reported in October. The report indicated that the unemployment rate dropped partially because the number of jobless Americans dropped by 325,000 to 15.4 million. Hidden within the numbers, though, is the fact that more and more of the unemployed are giving up on looking for work.