December 2004 Christmas Gift Sales Reportedly Surge While Profits Decline for Many Retailers

Wal-Mart has announced that it ended 2004 ahead of its most recent sales forecast after making the decision to cut prices at the end of November after a sluggish Thanksgiving weekend. This sharply contrasts with 2003, which has been characterized as one of Christmas gift sales at full-price.

Gift industry analysts reported that the overall 2004 Christmas gift shopping season will be remembered as the last-minute markdown as U.S. retailers cut prices before and after Dec. 25, choosing target sales gains over higher profit.

Wal-Mart executives did not like what they saw as Chistmas gift sales trends surfaced and decided to mark down 24 of the store's best selling electronic goods and popular toys to increase traffic. As a result, Wal-Mart reported, the 2 percent gain in December sales hit closer to 3 percent. Executives said the increase was the result of higher-than-expected gift sales in the week after Christmas, and many customers used gift cards to make purchases.

Most department stores and specialty retailers also reported marking down merchandise including clothing the week before and after Christmas. Gift industry analysts said the strategy brought a much higher traffic but also concerns that the discounts would hurt profits.

"We saw some of the most excessive markdowns at stores, including Ann Taylor, the Gap and the Limited's Express division," said Mark Friedman, a first VP at Merrill Lynch specializing in retail tracking.

Kmart executives reported that sales at stores open at least a year had declined 2.6 percent in December from the previous 2003 period, though they added it was better than the 12.8 percent decline for the third quarter.

Retail researchers said the surge in traffic just came too late for many merchants this Chistmas gift giving season and that retailers would find it difficult to hit profit expectations.