Tuesday, December 20, 2005

Holiday tally: Who's hot & who's not

Gadget sellers, etailers, home decor's sizzling but toys, clothes, department stores are hurting.

By Parija Bhatnagar, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) - Retail sales this weekend will be crucial as the holiday shopping season heads into what looks to be a nail-biting finish for the most important sales period of the year.

Industry analysts expects as many as 58 percent of consumers will have wrapped up their gift-buying by the end of the weekend. But since Christmas Eve falls on the following Saturday, procrastinators still get one more day next weekend to try score very last-minute deals.

Arlington, Va.-based mall operator, Mills Corp., which operates 39 malls around the country, is gearing up for a frenzied rush of shoppers over the next two days.

"We're expecting very heavy traffic at all our malls," Mills spokeswoman Becky Sullivan said, noting malls are scheduled to open at 9 a.m. this weekend, an hour earlier than their regular opening time.

"That being said, the Saturday before Christmas should be big too because it gives people that extra half a weekend to shop before both Christmas and Hanukah," she said.

What are some of the hottest products?

The company said its own survey of retailers housed in its malls showed bargain hunters are scavenging through stores looking for sales on items like Apple's iPod and Apple iMac, Bose stereo equipment, beauty gift sets from stores such as Bath & Body Works and Victoria's Secret, fur-lined boots, held massagers and velvet blazers.

Marshal Cohen, chief industry analyst with market research firm NPD Group, predicts 2005 will be a bonanza sales year for electronics retailers. "But I also see people buying a lot of footwear, home decor products and home appliances."

With just eight days to go in the Christmas countdown, here's a rundown on the winners and losers so far.

Ga-Ga over gadgets: Consumer electronics are on fire again this season as shoppers pick up not one but multiple digital cameras, MP3 players, videogame consoles like the Xbox, flat-screen TVs and personal computers.

"Digital cameras have become inexpensive enough for people to buy two," said Candace Corlett, retail analyst with WSL Strategic Retail.

Ted McDougal, spokesman for department store chain Sears, said digital cameras and plasma TVs have performed "very well" for the retailer. And if you didn't already snag the Xbox, good luck trying.

Although industry watchers expect consumer electronics category will be a winner, they're less sure about the performance of individual players.

Best Buy, the No.1 electronics retailer, this week posted third-quarter profits that missed expectations. It expects fourth-quarter results, which includes the key November-December holiday shopping months, to be in-line with analysts' estimates.

"Best Buy has historically been a poor stock performer in December with a track record of out performance in January as investors begin to focus on longer-term prospects," Deutsche Bank analyst Michael Baker wrote in a research note earlier this week. However, he added that a pick-up in sales of TV and gaming products "should help its fourth-quarter performance."

The sizzling world of cyber retailing: Market research firm ComScore Networks expects total holiday online spending, excluding travel, to jump 24 percent over last year to $19 billion.

On Black Friday alone, ComScore said consumers spent $305 million online, which was up 22 percent versus last year.

"One thing that people have to remember is that even though holiday online sales are projected to grow pretty substantially this year, total online sales still represents just about 5 percent of total retail sales," said George Whalin, an independent retail analyst.

He added that the online channel probably benefited somewhat from consumers' gas price woes.

"In some places where people live far from malls, they could have decided to shop online instead," he said.

Luxury appeal: Even though high-end merchants such as Nordstrom and Saks lost some their sales momentum last month, both Corlett and Whalin are still backing the category as a "clear" winner.

Said Whalin, "I think consumers are worrying about higher energy prices and that's impacting luxury sales to some extent. But I still think high-end retailers are heading for a good year overall. November was a little weak for them compared to the rest of the year but it certainly wasn't terrible."

Corlett agreed. "I think the story with luxury is that when you offer merchandise that's both unique and tempting to consumers, the money is there to buy."

Don't discount the discounter:Wal-Mart's set out to correct its big blunder last year during the holidays when it skimped on heavy discount in favor of preserving profits.

The world's largest retailer was quick to learn the error of its ways and launched an aggressive holiday marketing and promotions campaign for 2005.

The result: November sales rose 4.3 percent versus an anemic 0.7 percent gain for the same period last year. Moreover, Wal-Mart executives told CNNMoney.com they are confident the retailer will see another sales rush leading up to Christmas.

Said Corlett, "If people are worried about gas prices and utility bills, of course they will shop more at discount stores."

... and the losers

Apparel wrinkled: "Apparel's going to be challenging," said NPD's Cohen. "There's no one big hot trend in clothes. There's a lot of sameness across retailers and you also have to factor in a lack of impulse buying."

Impulse buying, or "me-too" purchases can account for as much as 29 percent of holiday sales, he said.

Whalin also faulted apparel sellers for not being more aggressive with their marketing efforts. Some teen clothiers such as Aeropostale did posted a decent 7.3 percent comparable sales gain last month but analysts pointed out that much of the sales were driven by the retailer's 50-percent off storewide promotions rather than the popularity of its merchandise.

Department store duds: With the exception of J.C. Penney, Whalin said department stores just don't have the unique merchandise to entice holiday shoppers despite trotting out the deep discounts.

"J.C. Penney did a very good job of upping its value with customers by offering more name brands at affordable prices," said Corlett. "Kohl's is another department store that should do well."

"I think Macy's is becoming more of a discounter," she added. "They're flooding mailboxes every week with discount circulars."

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