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Nov. retail gains narrow
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December 2, 1999: 11:36 a.m. ET
Comparable-store sales higher, though not as robust as previous months
By Staff Writer M. Corey Goldman
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NEW YORK (CNNfn) - Sales at big retailers were higher in November -- the first month of the year-end holiday shopping season -- though not as robust as in previous months, suggesting higher interest rates are deterring shoppers from loading up on goods.
For a third straight month, retailers posted higher sales at stores open a year or more, a reflection of consumer demand for all kinds of products, particularly discounted apparel, appliances and electronic goods, the stores said.
But gains were moderate in many cases, and several stores posted declines for the month ended Nov. 27 -- the height of the Thanksgiving shopping blitz. Warmer-than-usual weather and customers waiting for post-Thanksgiving blowouts were partly to blame, the stores said.
"What started out to be a rather soft month in November was saved by the Thanksgiving weekend, but overall you’re seeing sales trend lower,” said Dan Binder, a retail analyst with Brown Brothers Harriman & Co. "Given the current interest rate environment we’ll probably see that continue into next year.”
Contradictions
The numbers sit in sharp contrast to anecdotal reports of stellar Thanksgiving holiday sales in which throngs of shoppers spent lots of their hard-earned cash. They also sit in contrast to reports of robust third-quarter sales, according to many of the country’s biggest retailers.
Higher borrowing costs for consumers were at least partly to blame for the lackluster numbers, analysts said. The Federal Reserve last month lifted its benchmark interest rate by a quarter point to 5.5 percent, prompting banks to boost the interest rates they charge on loans and credit cards.
Indeed, a comparable-store sales index compiled by Brown Brothers Harriman declined to a 3.4 percent increase in November from 5 percent in October and 6.1 percent in September.
That outlook prompted Binder two weeks ago to downgrade his short-term ratings on the discount retailers that he follows. "Given the interest rate environment, some of these companies are approaching the higher end of their valuations,” he said.
An Internet Christmas
To be sure, some analysts speculated that sales aren’t slipping at all. Rather, online retailers such as Amazon.com (AMZN), CD Now (CDNW) and eToys (ETYS) are taking a portion of the holiday sales away from the traditional brick and mortar stores.
"Some of the business is certainly going to the e-tailers,” said Richard Church, a retail analyst with Solomon Smith Barney. "That’s been taking a bit of the wind out of sales at traditional stores.”
No jacket required
The types of goods sought by shoppers varied dramatically, affecting sales. Chains selling apparel only fared much worse in November than those selling electronic goods such as DVD players and computer systems. Discount retailers fared better as buyers hit the stores in search of holiday gifts such as Pokemon toys and jewelry.
During the first three weeks of the month, unseasonably warm weather curbed demand for cold-weather goods such as coats and sweaters at clothing and department stores. Shoppers hunting for Thanksgiving specials lifted sales during the last week, a period that can generate as much as 60 percent of the month’s business, analysts said.
"The early part of November was very slow and the last part of the month was very strong but it wasn't enough to lift sales for the month significantly,” said Michael Exstein, a retail analyst with Credit Suisse First Boston. At the same time, "people are still out there spending,” indicating for him that a slowdown in the retail business isn’t on the horizon.
Contrary to Binder, Exstein does not expect interest rates or anything else to slow shoppers down in the months ahead. "The general trend in terms sales remains strong,” he said. "What's selling are basics - home-related items, jewelry, dress-up items. Those goods are doing well.”
As for the month of December, traditionally the hottest shopping month of the year: ”It’s really too soon to tell,” Binder said.
Among discount retailers, Wal-Mart (WMT), the world’s biggest, saw its overall sales -- including its Sam’s Club warehouse outlets -- gain 5.6 percent. Kmart (KM), the No. 2 chain store, said its same-store sales rose 1.4 percent, while Costco (COST), the biggest U.S. chain of warehouse-club stores, said sales gained 8 percent last month. Electronics merchant Best Buy's (BBY) sales gained 9.2 percent.
Among department-store chains, Federated Department Stores (FD), parent of Macy’s, Bloomingdale’s and others, said its same-store sales gained 1.1 percent in November, while Sears (S) same-store sales gained 5.9 percent. Saks (SKS), owner of the upscale Saks Fifth Avenue and other regional department-store chains, said sales rose 1 percent, while May Department Stores (MAY) said its November sales were unchanged.
On the clothing-only front, Gap’s (GPS) same-store sales rose 1 percent, Limited’s (LTD) sales gained 5 percent, Talbot’s (TLB) sales rose 7.9 percent and Ann Taylor Stores’ (ANN) sales increased 4 percent.
Heading up the overall decliners was J.C. Penney (JCP), whose same-store sales declined 8.7 percent in November. Dillard's (DDS) sales fell 3 percent in November while Bon-Ton Stores' (BONT) sales declined 5.8 percent. 
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