Retail Detail. Luxury Boomed This Holiday Season, Discount? Not So Much. Second City Style Fashion Blog

January 5, 2007 • Shopping


According to AdAge, retailers that catered to the wealthy were the biggest holiday winners this
year, while discounters — especially Wal-Mart — were hit hard due to decreased spending by low-income consumers and unseasonably warm

Nordstrom jumps 9%
However, luxury department-stores beat those averages by a huge margin. Nordstrom reported a 9%
jump in sales this December.
Saks Fifth Avenue’s sales jumped an amazing 11.1%. Management pinned the gains on strong apparel sales —
despite industry-wide softness in the category.

The department-store resurgence wasn’t shared by chains catering to the
less affluent. Federated Department Stores, in its first season with a
national advertising campaign behind its Macy’s banner, came in below
forecasts with same-store sales of 4.4% (not the 5% to 8% expected by
analysts). Overall sales fell 8.5% to $5 billion. At Kohl’s, same-store
sales came in at 3%. At J.C. Penney, same-store sales were 2.6%.

For Gap Inc., sales declined 8% in December across the
company’s brands and 3,184 stores. The only positive same-store gain
came from its Banana Republic division, up 2% compared to a 5% drop in

Wallowing Wal-Mart
Wal-Mart, after warning sales could be as low as 1%,
bettered it’s forecast at 1.3%, yet rival Target saw a 4.4% increase. Costco, which also caters to a
high-income demographic, reported strong results, with a 9% increase in sales (due to a strong
demand for flat-panel TVs).

"There’s potentially a silver lining here," said Pat Conroy, vice
chairman of Deloitte’s retail consulting business, who added that
online sales in addition to gift-card redemptions may lift
fourth-quarter results. "It could be a pretty happy January for a lot
of retailers if the weather turns cold and gets people in that winter
buying mode."

‘Lessons Learned’
So what were the lessons of a season that saw heavy discounting and promotions, yet soft results?
Retailers "have to hunker down and keep inventory levels very lean,"
said James Hurley, a research analyst at the Telsey Advisory Group, a
retail-research firm based in New York.

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