Holiday clothing sales may prove to be disappointing

By Chelsea Emery

NEW YORK (Reuters) – A dearth of must-have fashions and
stronger demand for electronics may have trimmed holiday
apparel sales, likely disappointing retailers who hoped to cash
in on the traditional year-end bounce, analysts said Tuesday.

“Based on what we’ve heard and seen so far, the fashion
apparel stores and department stores are going to be hit with
lower profits,” said Kurt Barnard, president of Retail
Forecasting Group, which tracks industry trends and consumer
spending patterns.

The firm surveyed spending of consumers around the United
States and noted more aggressive sale signs in windows.

“Whatever strengths fashion apparel did show came from deep
markdowns,” Barnard said.

Aggressive discounts at girls’ fashion retailer Too Inc.
led Sanders Morris Harris analyst Elizabeth Pierce to speculate
that holiday sales may be trending below expectations.

The firm also cut its fourth-quarter earnings outlook on
Urban Outfitters Inc. to 24 cents per share from 25 cents,
citing the amount of clearance merchandise on the floor of
Urban’s Anthropologie shops.

“The lack of any ‘must have’ item on the apparel side has
not helped (improve sales), as there was no sense of urgency to
convince customers to shop early for seasonal apparel,” Pierce
wrote in a note to clients. “Also, it is highly likely that new
electronics, including iPods and XBoxes, cannibalized apparel
sales.”

BRIGHT SPOTS

Still, teens’ demand for the latest blue jeans could help
boost retailers’ results late in the quarter and consumers
could sweep in with gift cards to grab clothing items they did
not get under the tree, Piper Jaffray analysts noted.

Clothing tied with Apple Computer Inc.’s iPod as the most
desired item this holiday season and teens’ most desired gift
cards came from American Eagle Outfitters Inc. and Abercrombie
& Fitch Co.

“I saw a lot more focus on our retailers’ gift card
programs and that should translate into some very strong sales
this week,” said Matthew Ehrie, general manager of the
Westfield Garden State Plaza, New Jersey’s largest mall.

Ehrie said sales for stores in the mall were up 3 percent
over the period stretching from Thanksgiving to now, year over
year.

Casual clothing retailer Gap Inc., one of the most closely
watched harbingers of retail sales, may be showing some
improvement, according to Prudential Equity Group analysts. The
Internet markdown rates declined for Gap and its partner
stores, Banana Republic and Old Navy, week over week,
Prudential noted in its survey.

Still, the research firm noted that Gap stores appeared to
be discounting more items.

“The best (performers over the holiday selling season) were
probably the discount stores like Wal-Mart Stores Inc., Target
Corp. and TJX Cos. Inc.,” Barnard said.

He declined to say which ones would likely perform the
worst, but said: “the poorest probably would be the specialty
apparel companies, most of them, and the department stores.”