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The Squeeze Goes On: Comp Sales Dive and So Does the Dow

The dog days of summer lived up to their name at retail last month, further heightening the fears of tiffany earrings and investors about the holiday season ahead.

And while Wall Street expected a poor performance by retail in August, the financial markets recoiled at the news, sending the Dow Jones Industrial Average and the Standard & Poor’s Retail Index down more than 3 percent Thursday.

Despite falling oil prices and fresh fall merchandise, most retailers were scorched by their August results, with the majority reporting declines in comparable-store sales and none of the department stores tracked by WWD registering increases. In that sector, the high end got hammered like everyone else, with Neiman Marcus, Nordstrom and Saks Fifth Avenue all seeing comp-store sales declines.

Retailers saw sluggish sales that only began to pick up during the last 10 days of the month — just in time for kids throughout much of the U.S. to head back to school. Beset by growing unemployment, rising food prices and difficult credit and housing markets, consumers, uncertain if recent declines in gas prices would stick, generally headed to discounters for economical one-stop shopping, while department stores and specialty chains struggled.

Expectations going into Thursday’s same-store sales results were low, and weak comps did not alter that view. The combination of the poor start to the fall season and higher unemployment claims sent stocks into a tailspin as the Dow fell 344.65 points to 11,188.23, while the Standard & Poor’s Retail Index fell to 401.44.

“August was another in a series of weak months as the back-to-school season fizzled and the start of the fall fashion season got off with a resounding thud,” said Brean Murray, Carret & Co. retail analyst Eric Beder. “The only somewhat ’saving grace’ was that Street expectations, for the most part, were also heavily muted.”

The fact that consumers shopped late in the month was no surprise, according to Pali Capital Research tiffany necklaces Amy Noblin, citing a close-to-need shopping pattern that is expected to be evident for holiday as well. Retailers might try to blame weak sales this holiday season on a truncated window of time between Thanksgiving and Christmas, but don’t be fooled, Noblin said.

“Regardless of how much we all want to try to make out of the fact that there’s five fewer days between Thanksgiving and Christmas, the reality is, I think consumers will be shopping late,” she said. “They’ll be shopping for discounts. It’s a pattern we continue to see.”

August proved her point.

Discounters again led the pack, with Wal-Mart Stores Inc. generating a 3 percent boost, excluding fuel, that surpassed the 1.6 percent gain expected. Indicative of a strong b-t-s season at the world’s largest retailer, the company said denim products and licensed apparel were among the month’s standouts.

B.J.’s Wholesale Club Inc. posted a 15.4 percent gain in comps, up from a 1.4 percent rise last year. Costco Wholesale Corp. just missed double-digit honors, and analysts’ expectations, with a 9 percent jump, while Target Corp. sank 2.1 percent, which new chief executive officer Gregg Steinhafel characterized as “in line with our planned range.” It was Target’s second consecutive month of comp declines following a 0.4 percent increase in June and added to a growing number of months in which Target’s performance has fallen short of its rival discounter.

“Any growth is really going to the discounters, towards the big box guys, and it has been [going to them], and this is no exception,” said Moody’s Investors Service senior analyst Ed Henderson. “Still, in all this is just a continuation of what we have been experiencing the last year. The economy is tough and the consumer is absolutely pulling back the spending, and back-to-school is no surprise.”

Henderson said falling oil prices probably had little effect on spending. Noblin agreed, adding that perhaps declining oil prices offset the effects of the end of benefits from government-issued rebate checks from earlier in the summer, creating a similar trend.

“I continue to think unemployment and consumer credit are bigger pressures on discretionary spending than oil. No doubt lower oil prices will put money back in consumer’s pockets, but whether or not you have a job and access to credit, I think are bigger factors,” said Pali’s Noblin.

The month was especially hard on department stores, with the largest decline coming from Gottschalks Inc., which posted an 11.1 percent drop in comps, followed by The Bon-Ton Stores Inc. with a 10.3 percent decline. Bon-Ton said poor comps were due in part to weak results in women’s and men’s apparel and furniture, which was tiffany accessories by better results in children’s, cosmetics and accessories.

“Business did improve in the final week of the month, but we will look to September to get a better read on fall trends,” said Tony Buccina, vice chairman and president of merchandising.

Among upscale department stores, Neiman Marcus Inc. came closest to the break-even point with a 0.4 percent decline in comps. Neiman’s said precious jewelry and better women’s apparel were its strongest classifications. Nordstrom Inc. was off 7.9 percent during the month, with full-line stores down 12.5 percent and Rack units up 7.6 percent. Weighed down by disappointing results in women’s wear and footwear, Saks Inc. trended down 5.9 percent, with jewelry and fragrances helping it to avoid an even larger dip.

Dillard’s Inc. dropped 7 percent and, on Wednesday, midtier merchants J.C. Penney Co. Inc. and Kohl’s Corp. reported same-store declines of 4.9 percent and 5.8 percent, respectively. Value retailer Stein Mart Inc. was down 9.9 percent, versus a 5.2 drop in comps last August.

Moderate department stores got hit much harder, much earlier, and they are now facing somewhat easier comparisons than some upper-end merchants, said Thomas Weisel Partners retail analyst Liz Dunn. She added that this led them to control their inventories and expenses earlier and slow capital spending. Conversely, she said, the high end is currently seeing “deterioration,” which is why more promotions are being rolled out.

Home business has also been weak across the board, said Citigroup retail analyst Deb Weinswig, and makes up roughly 20 percent of department store sales.

“Housing turnover is still down double digits,” Weinswig said. “If people aren’t buying new homes or aren’t thinking about selling their existing home, then they’re not fixing up their homes, so that’s been a huge issue in regards to the sales of home merchandise.”

Specialty retailers fared slightly better, but not much.

Thursday’s big winners were American Apparel Inc. and teen retailers Aeropostale Inc. and The Buckle Inc., which pushed back with soaring comps of 31, 13 and 25.9 percent, respectively.

“I think Aeropostale is benefiting from two things,” noted Pali’s Noblin. “Number one: their product assortment is better. Number two: customers are trading down. The fact that their product assortment is better, makes that trade-down decision easier.”

Noblin said retailers like Buckle and American Apparel benefit from “unique, nichey” assortments.

“When you’ve got very unique merchandise where retailers are still able to command a price for that,” she said.

Gap Inc. was down 8 percent as Gap North America, Old Navy, Banana Republic and international comped lower by 5, 9, 14 and 2 percent, respectively. Abercrombie & Fitch Co. dropped 11 percent, with its flagship brand’s 5 percent decline pitted against double-digit dips of 14, 17 and 25 percent at the Hollister, Abercrombie and Ruehl divisions, respectively.

“Abercrombie & Fitch has been committed to maintaining a full-price business, and I think they are suffering because of it,” said Thomas Weisel’s Dunn. “They also have relatively high prices, and they are not going to discount, so their comps are suffering.”

Pacific Sunwear of California Inc. was down 6 percent, slightly less than expected, on poor accessories results, compared with a 9.6 increase in comps last year.

Women’s apparel retailer Chico’s FAS Inc. was off 10 percent for the month, compared with a 9.3 percent dip last year, while The Wet Seal Inc. turned in a larger than expected 8.7 percent drop, versus a 1.7 percent gain in 2007.

American Eagle Outfitters Inc. and Hot Topic Inc. reported August same-store declines of 5 percent and 2.7 percent, respectively, late Wednesday.

Piper Jaffray retail analyst Jeffrey Klinefelter said that back-to-school was off to a slow start, but that Hot Topic is “tightly controlling inventory and store level expenses to mitigate the deleveraging effect” in response.

Zumiez Inc. posted a 0.2 percent increase on Wednesday, compared to a 17.4 percent leap in comps last year.

“Footwear and skate hard goods have been positive contributors year-to-date,” said Klinefelter, “and are expected to remain so going into the back-to-school and holiday selling seasons.”

Klinefelter said that while b-t-s got off to an “adequate start,” it is really just beginning, making tiffany earrings the month to watch. Looking beyond, the “best-case scenario” for the holiday season is that it will be similar to last year, he said, adding that what’s more likely is that sales will be down slightly from 2007.

“No one really can tell when this is going to end,” said Moody’s Henderson. “But I think it’s going to be rough well into 2009.”

The one block stretch of Washington Street in downtown Brownsville is home to a half-dozen used and tiffany cufflinks clothing shops tucked neatly between Mexican restaurants. On a recent rainy weekday, the stores-all coincidentally owned by members of the Licona family-were conspicuously without customers.

“We’ve been super bad all summer long,” admitted Jeannette Licona, manager of Aylin’s Corner Shop. “We were hoping once school started and people got back on their feet, things would pick up.”

If anything, Jeannette added, things have gotten worse. Despite a tightening economy and its proximity to the University of Texas Brownsville and Texas Southmost College, many store owners in downtown Brownsville say business has hit an all-time low.

The financial crisis that has gripped Wall Street is being felt by consumers on Main Street, forcing consumers to change their behaviors in myriad ways, not the least of which is where they buy clothes. It has been widely reported that Goodwill Enterprises and the Salvation Army have witnesses record customer traffic.

Instead of dropping hundreds of the latest fashions, shoppers are spending their dollars on discount clothing. In some cities, the shift has thrust stores that depend on donations, like the Goodwill, into uncharted waters where demand could outpace inventory.

That has not been the case in Brownsville.

Jeannette opened her store nearly five years ago. At first, she envisioned a store that sold kitsch purses,tiffany money clips and accessories, but her merchandise didn’t sell at least enough to turn a profit. A few weeks ago, she introduced a couple rows of clothing in the hopes of attracting customers. So far it hasn’t.

“How long has it been slow?” Jeannette asked an employee. Neither could remember.

Jeannette is the pregnant mother of two and a student at UTB-TSC.

She says Aylins Corner Chop brings in just enough to pay the bills. To cut her losses, she asked her parents, who own Lusylette, a repo furniture store next door, to assume ownership of Alyin’s. Lusylette has not fared much better. A hand-written sign taped in the window announces that all patio furniture has been marked down 50 percent.

Once she completes her degree, there won’t be much incentive to keep her business going, Jeannette said.

Farther down the block, Lorena Licona runs Karry’s, a vintage and used clothing store.

Her story mirrors Jeannette’s: To minimize losses she leaves the air conditioner and lights off for as long as possible. She is also considering another option — subletting a portion of her store.

The infrastructure is already in place.

“I tried to sell new cloths, but they want name brands,” Lorena said.

Marta Gutierrez walked through the isles of Karry’s, shirts and pants folded over one arm. Winter clothes for my kids, she said.

From Matamoros, Gutierrez represents the majority of downtown shoppers, Lorena said.

“I’ve always bought downtown,” Gutierrez admitted. “It’s just more economic, and the quality is better.”

But earlier this week, Gutierrez was among less that six shoppers at Karry’s. She said Matamoros is not immune to a slowing U.S. economy. But that’s not the only problem, Guitierrez said. Long lines at the border and greater scrutiny from border agents have discouraged many from shopping in Brownsville.

Francisco Perez is owner of Rio Grande Store, a fabric and tapestry shop on Washington Street. He relies on his regular customers, but after 40 years of operating downtown, he said times have never been tougher.

The current environment is perhaps worse than the peso devaluation a generation ago, he added.

“When the peso devaluation hit, we could offer a discount and people would still buy,” Perez said. “tiffany pendants, with a discount, people aren’t buying.”

Perez said high rents only add to the problem.

“They want $4,500 a month,” he said, motioning to a vacant building across the street.

After a quick calculation, he said, “You’d have to make $375 per day just to pay the rent. That’s just for rent, not the air conditioner or anything else.”

Ask around and you’ll find the pressures are manifold, not the least of which is the discount superstore Ross, according to Christina Licona, owner of El Cid.

“(Customers) say why should I pay $7 for a used shirt when I can spend the same for a new and a name brand shirt at Ross?” Christina said.

When she opened for business 16 years ago, she fared well, even managing to owe taxes. However, there has been a steady decline dating back several years. Now, come tax time, she relies on her tax refund.

With the arrival of Ross, her business went from bad to worse.

“From one day to the next, everything changed,” she said.

Christina helped a customer zip the back of a lime green dress while describing the fundamental challenge hers and other vintage stores face.

In a different market, surely her store would be successful, but that’s not what most downtown shoppers are looking for, she said.

“People here want name brands,” she said. “It doesn’t matter if it’s used as long as it’s a recognized label.”

Amid racks of vintage clothing and collectibles that crowd her shelves, it seems El Cid is the antithesis of Ross, which sells name brands at a discount.

Christina says she was raised to see the virtues of owning her own business, but her struggles have fueled her frustration and led her to counsel her kids to pursue higher education.

The future of El Cid is uncertain. She hopes to ride out the storm, but if sales continue their decline, changes could be in the offing.

“If things get worse?” Licona pondered for a moment before responding. “I guess I’ll go tiffany earrings at Wal-Mart.”

It’s beginning to look a lot like Christmas at some of the nation’s stores, as retailers struggle to find tiffany pendant to make shoppers forget about their battered 401(k) plans.

Neiman Marcus’ trees have been sparkling since mid-September, and Wal-Mart began opening its Christmas shops last week. But that hardly means many are in a holiday spirit: It’s all part of an effort to extend a holiday shopping season that some analysts say could have the slowest sales growth since the 1991 recession.

Consumer confidence — a measure of people’s attitudes about the current and future state of the economy and their own financial situations — had its biggest single-month drop in September since RBC Capital Markets began calculating its index in 2002. And this season, which brings stores most if not all of their annual profits, is likely to be a make-or-break one for many small retailers and those that were struggling before the economy’s dramatic slide.

So stores are doing all the cost cutting they can to preserve profit margins. For shoppers, that will mean fewer choices of merchandise as retailers trim what they have in stock. It also will mean fewer salespeople available to help shoppers. Meanwhile, many retailers are likely to have more and earlier promotions to try to lure people into stores. Wal-Mart beat its own early start last year when it started holiday price cutting on toys Oct.1.

“Things will appear to be similar,” says Richard Hastings, a consumer strategist at Global Hunter Return to Tiffany heart tag Charm and bracelet. “Yet underlying those appearances will be a lot of caution regarding inventory, promotions, displays and advertising. Retailers know the consumer is not reliable right now.”

Jen Valliere, an Ashburn, Va., mother of three boys, is one of those cautious consumers.

“I do plan to spend less, because I have less to spend,” says Valliere, whose husband is a real estate agent.

She’s been selling things on consignment and just sold gold jewelry to pay for her sons’ Christmas gifts. Along with her sister, Valliere plans to strip the wallpaper in their parents’ kitchen and paint it as a Christmas gift.

The National Retail Federation said last month that retail sales for November and December are expected to increase just 2.2%, the least since 2002.

A week earlier, the market research and consulting firm TNS/Retail Forward predicted sales for the tiffany ring quarter would be up just 1.5%, which would be the smallest increase since 1991.

September retail sales announced last week remained dismal, with luxury retailers including Neiman Marcus and Saks posting double-digit declines in monthly sales. Discounters benefit in an economic downturn, but even Target saw a 3% decline in September sales compared with the same period in 2007.

The problems are hardly new this fall. Sales growth at publicly traded retailers this year is at a paltry 0.3%, down from 3.7% at this time last year, according to financial information company Sageworks.

Clothing stores such as American Eagle Outfitters and Gap saw decreases in sales last month, as apparel has proved to be more discretionary than retailers hoped. The net profit margin in the private retail clothing sector has decreased 31% since 2006, Sageworks says.

With its even faster jump-start to the season as well as price cutting, Wal-Mart isn’t taking any chances — and says it is only meeting its customers’ needs.

In a recent survey of 1,000 shoppers, 39% indicated they will shop “earlier and make other Return to Tiffany Heart tag ring to help stretch their holiday cash,” Wal-Mart says. They plan other economy-related adjustments as well: 39% said they plan to buy less-expensive items, and 35% said they planned to buy gifts for fewer people.

Heidi Arnest says she is going to be spending less on gifts, looking for bargains and avoiding department stores because she fears there won’t be enough merchandise or staff.

“It is very popular in my circle of friends to be more frugal in such difficult times,” says Arnest, an insurance saleswoman in Irvine, Calif. “People feel that spending time with their friends and family is more important than being extravagant this year.”

Recognizing these trends, retailers say they’ll try to cut costs without alienating customers.

“Retailers are in it to sell merchandise and be profitable. They don’t want to self-fulfill lower sales because they didn’t have enough people on hand or the right products on the shelf,” says Kevin Sterneckert, retail research director at AMR Research, which advises companies on technology.

Stores are coping with this economic downturn in a variety of ways that will have an impact on holiday shoppers. Among them:

Offering less merchandise

Retailers were especially cautious with overseas inventory orders earlier this year and will continue to be tiffany earring about overordering as the holidays approach, analysts say.

“A key focus will be to not overinvest in inventory,” Hastings says.

The credit crunch also could reduce inventories even for retailers who pay their bills on time, says retail analyst Amy Noblin of Pali Capital, who says she’s hearing reports of “delivery disruptions.”

Some manufacturers and distributors may be so hard hit by the “credit freeze” that they don’t have the money to ship merchandise, she says.

That could mean empty shelves if consumer spending picks up and certain items prove to be bigger sellers than they were in past years. But many retailers are using new technology to try to avoid such scenarios.

Software now used by many retailers is making inventory control so precise that most major retailers should have enough, say, size 8’s in cities where a lot of women wear that size. And they know what sold well and where last year so stores should be able to predict buying patterns this year, Sterneckert says.

Many retailers also can afford to keep less merchandise on hand because clerks increasingly are able to tap into warehouse inventories online so they don’t have to turn customers away.

Steve Kramer, president of e-commerce company iCongo, recently rolled out this Heart tag charm Toggle bracelet in Lord & Taylor stores.

Kramer says if a store with this technology is out of a particular style or size, the sales clerk can find the right merchandise online and ship it to a customer’s home the next day. Previously, retailers typically reserved certain warehouse inventory for stores and other goods for their websites.

“Stores will be smart to use caution with inventory,” says Jim Taylor, vice chairman of the Harrison Group, a marketing consulting and research company.

“Shopping is more and more an act of love,” he says. “You may not be buying all you bought last year.”

Having better promotions

For competitive reasons, most big retailers are keeping their holiday promotional plans quiet. But even though improved inventory controls will reduce the need for clearance sales, Noblin says, retailers will have more planned promotions to draw people into stores.

Retailers that don’t increase promotions likely will have some ready as “contingency plans because the earth is so shaky,” says Phil Rist of consumer insights firm BIGresearch.

Even the wealthy are waiting for sales.

A new study of affluent consumers by the Harrison Group and American Express Publishing found 83% said they usually wait to buy things when they are on sale, up from 67% 10 months ago.

As the Harrison Group notes, even though these families with $100,000 or more in discretionary household income make up just 10% of the population, they account for 50% of retail spending.

To steel themselves for a likely slowing in gift-card sales — which have been increasing every year — stores are expected to give more of them away as part of promotions, Rist says.

Gift cards given away with other gift-card purchases — such as $20 with a $100 card purchase — are a way to bring consumers back into a store to spend more, which many restaurants did last year with their gift-card promotions.

But when holiday budgets are as stretched as they will likely be this year, gift cards might lose some appeal.

“Some consumers may be going back to merchandise,” Rist says. “They may think, ‘If I buy Uncle Ned a $50 gift card, I’ve got to spend $50, but if I buy him a $50 sweater that’s marked down to $25, I save $25.’”

Hiring fewer salespeople

Facing slow sales and squeezed profit margins, many retailers will be looking to cut payroll costs, Noblin says.

Hiring of seasonal workers is likely to be at about the level after the Sept.11 terror attacks, says Dan Butler, the retail federation’s vice president of retail operations.

Retailers likely will adjust part-time and seasonal workers’ hours to meet the ebb and flow of charm bracelet shopping, Butler says.

In a tight economy like this, chains may add staff in top-selling stores while lower-performing ones get fewer workers, he says.

“If they’re adding staff, they need to be generating sales as a result of added staff,” says Butler, a former store manager at Macy’s and Hecht’s.

More lower-priced items

Many stores are expected to add more lower-priced items to their merchandise mix to try to appeal to increasingly budget-conscious consumers, says Casey Chroust of the Retail Industry Leaders Association.

Coach has said it will have more less-expensive handbags this holiday season, but most other retailers aren’t announcing their plans.

Such moves could help reverse what’s expected to be a decline in “self-purchasing” by holiday shoppers this year, Noblin says.

“Being careful is becoming a bigger virtue,” says Taylor, co-author of the book The New Elite: Inside the Minds of the Truly Wealthy.

“I think this may be one of those moments where you do have a tipping point after 20 years of ‘I wantism,’” Taylor says.

Even so, retailers need to be prepared with the right merchandise, whether it’s Prada Tiffany 1837 cuff or low-priced trinkets that consumers are seeking.

Retailers, Sterneckert says, will “make the very best of whatever the holiday season will be.”

J. C. Penney Company, Inc. (NYSE:JCP) comparable store sales decreased 8.1 Tiffany Bangles for the five-week period ended Jan. 3, 2009, better than the Company’s guidance for a low-double digit decrease. During the same period last year, comparable store sales decreased 7.3 percent. Total Company sales in December decreased 6.8 percent.

The December period was extraordinarily promotional across the retail industry. Over the course of the month, the Company took aggressive promotional pricing action across all channels, which resulted in improved sales during the week leading up to Christmas and for the remainder of the month. This served to partially offset weaker performance earlier in the period. Comparable store sales results for December also benefited from an increase in sales through jcp.com, the Company’s Internet channel.

For the December period, women’s apparel and accessories and family shoes were the top performing merchandise divisions, while fine jewelry continued to experience softer sales performance. Geographically, the best performing areas of the country were the southwest and central regions, while the tiffany bracelet region had the weakest results.

January Sales Guidance

Management’s guidance for the four-week period ending Jan. 31, 2009, is for a low-double digit decrease in comparable store sales. In last year’s January period, comparable store sales were flat.

Sales Conference Call Recording (8:30 a.m. ET) — (877) 793-7778

About JCPenney

JCPenney is one of America’s leading retailers, operating 1,093 department stores throughout the United States and Puerto Rico, as well as one of the largest apparel and home furnishing sites on the Internet, jcp.com, and the nation’s largest general merchandise catalog business. Through these integrated channels, discount tiffany offers a wide array of national, private and exclusive brands which reflect the Company’s commitment to providing customers with style and quality at a smart price. Traded as “JCP” on the New York Stock Exchange, the Company posted revenue of $19.9 billion in 2007 and is executing its strategic plan to be the growth leader in the retail industry. Key to this strategy is JCPenney’s “Every Day Matters” brand positioning, intended to generate deeper, more emotionally driven relationships with customers by fully engaging the Company’s 155,000 Associates to offer encouragement, provide ideas and inspire customers every time they shop with JCPenney.

This release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which reflect the Company’s current views of future events and financial performance, involve known and unknown risks and uncertainties that may cause the Company’s actual results to be materially different from planned or expected results. Those risks and uncertainties include, but are not limited to, general economic conditions, including inflation, recession, unemployment levels, consumer spending patterns, credit availability and debt levels, the cost of goods, trade restrictions, changes in tariff, freight, paper and postal rates, changes in the cost of fuel and other energy and transportation costs, competition and retail industry consolidations, interest rate fluctuations, dollar and other currency valuations, risks associated with war, an act of terrorism or pandemic, and a systems failure and/or security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information. Please refer to the Company’s most recent Form 10-K and subsequent filings for a further discussion of risks and uncertainties. Investors should take such tiffany pendant into account when making investment decisions. We do not undertake to update these forward-looking statements as of any future date.

Neiman Marcus Inc. reported Thursday a 16.6 percent decline in August same-store sales as the tiffany bracelet-based retailer’s stores in Texas and the Southeast pulled in stronger revenue than in other regions.

Direct sales from catalog and Internet reversed declines and increased 0.1 percent as the company hosted several online-only special sales over lunch hours and other promotions. Top selling direct categories were women’s contemporary apparel and dresses, beauty and shoes.

Same-store sales from specialty stores Neiman Marcus and Bergdorf Goodman fell 19.6 percent. In stores, categories that performed the strongest were ladies’ shoes, precious jewelry, beauty and couture apparel.

Total August sales fell 15.3 percent to $241 million from $285 million a year ago. It was the tiffany pendant consecutive month of declining same-store sales for Neiman Marcus as even its high-income customers slowed spending during the recession.

Neiman Marcus plans to report its fiscal fourth-quarter results on Tuesday after the market closes. The company was taken private in 2005 but continues to report results because it has publicly traded debt.

Ventura Mayor Christy Weir says the city is working hard to spend limited taxpayer dollars Heart tag charm Toggle bracelet, and the temporary, four-year sales tax increase would go a long way toward paving streets, fixing potholes, keeping the Wright Library open and boosting public safety.

Because it’s a local tax, the state can’t touch it, and visitors would pay their share. “Every dollar would go to enhance services this community deserves,” she said.

But opponents say this is no time to raise the sales tax, a regressive levy that would hit people with the least income the hardest. They also say they don’t trust city government to spend the money prudently. Because the spending plan for the tax money is nonbinding, the City Council could shift the funds at any time.

“Just because other cities have approved new taxes does not justify Ventura’s defense for more taxes,” said local banker Bob Alviani, adding the city has $12 million in uncommitted reserves and $160 million in investment reserves — both of which could be drawn on to get Ventura through its budget woes. “Everyone needs to live within their budget — that includes the city.”

The Nov. 3 ballot measure requires a simple majority to pass. It would boost the city’s sales tiffanys from 8.25 percent to 8.75 percent, matching the rate in Oxnard and Port Hueneme, where voters approved similar tax increases last year, as the highest in the county.

The state raised California’s sales tax by 1 cent in April. That increase is scheduled to expire July 1, 2011.

Rate higher in L.A.

If approved, Ventura’s tax rate still would be lower than Los Angeles’ 9.25 percent. Santa Barbara collects 8.75 percent.

A half-cent increase would cost Ventura residents and visitors an additional $1 for every $200 of taxable goods they purchase.

Residents who purchase vehicles cannot avoid the tax by shopping elsewhere. In California, the vehicle sales tax is based on a buyer’s residence, not the point of sale.

The city of Ventura, like many families, has fewer dollars coming in and growing costs, said Weir, who cited new countywide stormwater regulations that will cost the city an additional $1 million.

Ventura this year made $11 million in cuts across all city departments, including eliminating more than 40 jobs. All union and nonunion employees agreed to accept at least a 5 percent pay cut, with managers forfeiting 10 percent.

The Wright Library on Day Road is open only because of private fundraising efforts by tiffany jewelry on sale.

“The City Council has committed to spend this money only on high-priority services such as road paving, libraries and public safety,” Councilman Bill Fulton said.

Fulton said the city already has dipped into reserves to keep four police officers on the street, and opponents’ suggestion to dip deeper is fiscally irresponsible. Also, a citizens oversight committee would review spending of the new tax money.

Sunset in four years?

But Don Facciano, president of the Ventura County Taxpayers Association, said it’s a risky proposition for voters to put their trust in a city promise.

“Do we really think when they say this increase expires in four years that it will go away? If we are spending money now on new programs, how are we going to maintain those programs?

“They say, ‘Trust us,’” he said, “but what about the 911 (fee) money that was never refunded?”

Ventura repealed its short-lived monthly 911 fee for emergency services last year. Phone users had all spring to request refunds. Few did. Of more than $1.2 million in fees collected, only about $17,000 was refunded. The city used the rest to balance the budget, officials said.

Merchants in Oxnard who have lived with that city’s half-cent increase since April were split over its effects.

Various levies ‘add up’

“It hasn’t stopped business, but it’s been noticeable,” said Rick Alpern, general manager and vice president of DCH Honda of Oxnard. “We are in a market where every dollar counts, and the taxes — state, county, local — they add up.”

But Daniel Rozmaryn, owner of Gala Furniture on Ninth Street, blamed the slumping economy and high unemployment. He said furniture sales are down 45 to 50 percent from two years ago.

“I have lost customers due to the economy, not necessarily to the tax increase,” he said. “If you have good prices, they will still buy.”

Oxnard initially projected additional revenues of about $10 million, but now expects closer to $8 million a year, Oxnard Finance Director Jim Cameron said. He said he hasn’t received any complaints from business owners specifically about the half-cent increase being detrimental to sales.

“The half-cent is a pretty small part of the total sales tax you are paying,” he said. “I don’t think people view that as being significant.”

Debbie Fox, who along with her husband owns Fox Fine Jewelry in downtown Ventura, generally agreed.

“If someone can afford a $4,000 ring, they can afford the extra half-cent,” she said. “My bigger concern is about shoppers turning to the Internet, where they don’t pay any sales tax. Overall, I don’t think it will change their buying habits.”

Outside the Target store at Ventura’s Pacific View mall recently, resident Jamie Olmstead and friend Stacy Olsen were buying household items for their families. Olmstead spent $37.43 on paper towels and other paper products. The same items would cost 18 cents more under the new rate. Would it cause her to Return to Tiffany heart tag Charm and bracelet less or drive to the Target in Camarillo to avoid the increase?

Not worth going elsewhere

“For 20 cents? No, I wouldn’t waste the gas. And I would still buy all the essentials we need,” Olmstead said.

Olsen, who would have paid 17 cents more for the cosmetics in her bag, agreed. “There are some things you just don’t skimp on.”

Olmstead said she was undecided on the tax but was leaning against it because she felt voters should have a say in how the money is spent. That, however, would require a special tax needing a two-thirds approval, an approach the city tried unsuccessfully in 2006.

Outside Yolanda’s Mexican Restaurant on East Main Street, Daryl Petrilli spent nearly $40 on takeout food for his wife and two daughters. The burritos and kid’s meals would cost about a quarter more under the new rate.

“Twenty cents is not that big of a deal. That wouldn’t stop us from going out for dinner,” he said. Still, “it’s not the time to be raising taxes.”

Jeff Tolbert said Measure A gives residents the opportunity to decide whether they want rings services. “We are a tourist town,” he said, standing recently outside the Ventura Theater waiting for a concert. “We need to capitalize on that. These people want to come here. They can help us pay for better roads.”

November Sales Outlook and Updated Third Quarter Earnings Guidance Management’s guidance for the four-tiffany earring period ending Nov. 28, 2009, is for a 4 to 7 percent decrease in comparable store sales, compared to an 11.9 percent decrease in last year’s November period.

Management now expects third quarter earnings to be in the range of $0.10 to $0.11 per share, including a charge of approximately $0.03 per share, primarily related to non-recurring real estate impairments. The Company’s most recent guidance was for third quarter earnings to be in the range of $0.03 to $0.10 per share. Third Quarter Earnings Release JCPenney will release its third quarter financial results before the market opens on Friday, Nov. 13, 2009. Management will host a live conference call and real-time webcast on Nov. 13, 2009, beginning at 9:30 a.m. ET. Access to the conference call is open to the press and general public in a listen-only mode. To access the conference call, please dial 877-407-0778, or 201-689-8565 for international callers, and reference the JCPenney Third Quarter Earnings Conference Call. The telephone playback will be available for seven days beginning approximately two hours after the conclusion of the call by dialing 877-660-6853, account code 286, conference ID charm bracelet 328509. The live webcast may be accessed via JCPenney’s Investor Relations page at jcpenney.net, on streetevents.com (for members) or on investorcalendar.com. Replays of the webcast will be available for up to 90 days after the event. Sales Conference Call Recording (8:30 a.m. ET) — (877) 793-7778 About JCPenney JCPenney is one of America’s leading retailers, operating 1,109 department stores throughout the United States and Puerto Rico, as well as one of the largest apparel and home furnishing sites on the Internet, jcp.com, and the nation’s largest general merchandise catalog business. Through these integrated channels, JCPenney offers a wide array of national, private and exclusive brands which reflect the Company’s commitment to providing customers with style and quality at a smart price. Traded as “JCP” on the New York Stock Exchange, the Company posted revenue of $18.5 billion in 2008 and is executing its strategic plan to be the growth leader in the retail industry. Key to this strategy is JCPenney’s “Every Day Matters” brand positioning, intended to generate deeper, more emotionally driven relationships with customers by fully engaging the Company’s approximately 150,000 Associates to offer encouragement, provide ideas and inspire customers every time they shop with JCPenney.

Keywords: J. C. Penney Company, Inc., J. C. Penney Company, Inc., Department Stores, Retail, Real Estate, Finance, Financial, Investing, Investment, New York Stock Exchange, Real Estate, Stock Market, Department Stores, Finance, Financial, Investing, Investment, J. C. Penney Company Inc., New York Stock Exchange, Real frank gehry, Retail, Stock Market

This article was prepared by Real Estate Weekly News editors from staff and other reports. Copyright 2009, Real Estate Weekly News via VerticalNews.com.

One of the busiest shopping weekends of the holiday season delivered a hint of discount tiffany for some local boutiques and gift shops.

Sales were up slightly at several Roanoke area stores on Friday and through the weekend, compared with last year.

But it’s too early to tell whether the past few days signal a strong holiday sales season for retail, an industry hit hard by slow consumer spending.

A spokesman for the National Retail Federation said Sunday that the industry group will not change its forecast of a 1 percent decline in holiday retail sales. Scott Krugman of the NRF said it may revisit the forecast later in the season.

Meanwhile, more people shopped on Black Friday, the day after Thanksgiving, compared with last year, but they spent less, the NRF reported. Shoppers were lured by deep discounts on high-dollar electronics, and even practical gifts, including $3 slow cookers.

Though 195 million people shopped on Black Friday, an increase from 172 million last year, each person spent on average $343.31. That’s down from $372.57 from 2008.

Local retailers tried new tactics to entice shoppers this holiday season, and it seemed to pay off last tiffany jewelry sale.

Gwenda Kellett discounted all gifts and Christmas decor by 20 percent on Friday and Saturday at her Southwest Roanoke County shop, Plantagenet Rose. This was the first year that she put merchandise on sale surrounding Black Friday.

She believes that the discounts helped to lift the weekend’s sales by 10 percent to 15 percent over last year’s levels.

Customers “were in the mood to shop,” Kellett said. “Twenty percent off makes them a little bit more focused.”

Mary Barton said she tried to be smarter about the kinds of merchandise that she ordered this year for her store, Willow Grove, in Roanoke County. She added some lower-priced items, such as sterling silver jewelry and Tyler candles.

The jewelry, which can be engraved, ranges from $25 for earrings to $45 for rings.

Also, three small Tyler candles are $10, while larger candles are $16.

“I tried to be so careful, knowing that customers are looking for better price points,” Barton said.

Her shop’s weekend sales were up from last year.

Even so, business at Millie & Co., a women’s boutique in downtown Salem, was brisk even though there weren’t many sales.

Last year at this time, co-owner Ann Wolfer marked down much of the shop’s merchandise, hoping that it would move off racks as financial uncertainty peaked.

This year, she set up only one $25 sales rack of leftover merchandise from past seasons. charm bracelet else at Millie & Co. was discounted.

The shop’s results were pleasantly surprising.

Between Wednesday and Sunday, people bought full-priced sweaters and accessories as gifts. Others even snatched apparel for themselves, such as $150 to $250 cocktail dresses, Wolfer said.

Saturday was Millie’s busiest day, while sales for the entire weekend were higher than last year.

“I’m beginning to see a little bit more consumer confidence as opposed to consumer wariness,” Wolfer said.

From Tiffany Bronze Dore plates to an old opium box, the items on display at the Kirkland Fine Arts Center galleries this weekend will be a little different than the regular pieces on exhibit.

That’s because it’s time for Millikin University Art Department’s Winter Antique tiffany bracelets.

Ed Walker, chairman of the department and an accredited appraiser, puts together large, high-end antique sales twice a year with pieces that come mostly from local estate sales.

This season’s show is fueled largely by the estates of Judge A.G. Webber III, who died this past February and longtime Decatur residents Dorothy and Bob Nichols, who recently relocated to Colorado.

“If people are interested in getting something from a major estate in town, this is a good place to do it,” Walker said.

Among the items from Webber’s estate is a large desk that once was in the administration offices of A.E. Staley Mfg. Co.

Walker said two pieces he expects to get the most attention during the weekend are an 1867 tiffany on sale 13 star flag and a hand colored lithograph from the 1893 World’s Columbian Exposition in Chicago.

“We’re developing, I think, a reputation of having some pretty good stuff,” Walker said.

This is the fifth sale of this sort Walker has hosted at Kirkland. He works with banks and estates in the area to find the items and then does the research to determine how they should be priced. As soon as this sale finishes Sunday he’ll begin preparing for the next sale this summer.

Walker has pushed to make the event a respectable one at which people can find high-end antiques that normally can’t be found in local antique shops. The difference, he said, is most of the items available at his sale were already a part of someone’s collection, and now they’ve been made available to transfer into someone else’s collection.

“By doing this twice a year, we’re trying to build not only a client base, but a reputation so that people know that when I have a sale at Millikin, it’s going to be topnotch and it’s going to be always interesting,” he said.

While some of the pieces cost as much as $5,000, there are still many items that cost less than $10.

“I really try hard to get a nice variety,” Walker said. “With the accumulation of an estate, you get all kinds of stuff.”

And besides going home with a collector’s item, shoppers also could go home with some valuable tiffany sale from Walker.

“We try to give people as much personal attention as possible when they come in,” he said. “I give out a lot of free appraisal advice on those three days that I usually don’t give out.”

In addition to the items being prepared by Walker, Patty’s Antiques will be selling antique furniture and Flora Gems will bring a few hundred pieces from its estate jewelry department.

John Flora of Flora Gems said the show went well for them the first time they participated, so they’re coming back to try it again.

“There’s certainly is a correlation between people that are looking to buy antique collectibles and furniture, and the group that like to look at estate jewelry,” Flora said. “It gets a lot of people together in the same place at the same time.”

Also on sale will be a collection of fine art paintings and prints. A standout piece is a painting by English artist W.H. Weatherhead. It’s sale price is $5,000.

“This is museum quality art right here, so hopefully that’ll end up in somebody’s house,” he said. “That’s the kind of stuff we really like to have so people can kind of get an education and see something that they otherwise wouldn’t’ be able to see.”

Walker said about 10 percent of the profits from the show will benefit Millikin’s art department.

arueff@herald-review.com 421-6986

IF YOU GO

WHAT: Winter Antique Sale

WHEN: 9 a.m. to 5 p.m. Friday through Sunday

WHERE: Perkinson and lower art galleries in the tiffany jewelry on sale Fine Arts Center

Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its fourth quarter ended December 31, 2009.

Operating cash flow was $3.29 billion in 2009, compared with $1.70 billion in 2008. Free cash flow increased 114% to $2.92 billion in 2009, compared with $1.36 billion in 2008.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 461 necklaces on December 31, 2009, compared with 446 million a year ago.

Net sales increased 42% to $9.52 billion in the fourth quarter, compared with $6.70 billion in fourth quarter 2008. Excluding the $354 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales would have grown 37% compared with fourth quarter 2008.

Operating income increased 75% to $476 million in the fourth quarter, compared with $272 million in fourth quarter 2008. Excluding the $31 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, operating income would have grown 63% compared with fourth quarter 2008.

Net income increased 71% to $384 million in the fourth quarter, or $0.85 per diluted share, compared with net income of $225 million, or $0.52 per diluted share, in fourth quarter 2008.

“Millions of people now own Kindles,” said Jeff Bezos, founder and CEO of Amazon.com. “And Kindle owners read, a lot. When we have both editions, we sell 6 Kindle books for every 10 physical books. This is year-to-date and includes only paid books — free Kindle books would make the number even higher. It’s been an exciting 27 months.”

Full Year 2009

Net sales increased 28% to $24.51 billion, or 29% excluding the $182 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the year, compared with $19.17 billion in 2008.

Operating income increased 34% to $1.13 billion, or 39% excluding the $40 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the year, compared with $842 million in 2008. Included in 2009 operating income is the impact of our settlement with Toysrus.com LLC for $51 million. In 2008, tiffanys income included a $53 million non-cash gain recognized on the sale of the Company’s European DVD rental assets.

Net income increased 40% to $902 million in 2009, or $2.04 per diluted share, compared with net income of $645 million, or $1.49 per diluted share, in 2008.

Highlights

– Kindle and Kindle DX are available for immediate shipment to over 100 countries. Additionally, the Kindle for iPhone App is now available from the Apple App Store in more than 60 countries. Customers around the world can now synchronize reading between their Kindle, Kindle DX, personal computer, iPhone, iPod touch and soon, Blackberry, Mac and iPad.

– The U.S. Kindle Store now has more than 410,000 books, including 100 of 112 New York Times Bestsellers, more than 8,000 blogs, and more than 130 top U.S. and International newspapers and magazines, including: The New York Times, The Wall Street Journal, The Times (U.K.), Le Monde, The Economist, The New Yorker, Newsweek, and Time.

– The Company announced that authors and publishers around the world can now use the self-service Kindle Digital Text Platform (DTP) to upload and sell books in English, German and French to customers worldwide in the Kindle Store.

– Amazon.com announced a new 70 percent royalty option for Kindle DTP, enabling authors and publishers to earn more royalties. Beginning June 30, authors and publishers who select the new royalty option will receive 70 percent of list price, net of delivery costs.

– The Company introduced Kindle Development Kit, which gives developers access to programming interfaces, tools and documentation to build and upload active content for Kindle.

– North America segment sales, representing the Company’s U.S. and Canadian sites, were $4.96 billion, up 36% from fourth quarter 2008.

– International segment sales, representing the Company’s U.K., German, Japanese, French and Chinese bangles, were $4.56 billion, up 49% from fourth quarter 2008. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, International sales grew 37%.

– Worldwide Media sales grew 29% to $4.68 billion. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, sales grew 23%.

– Worldwide Electronics & Other General Merchandise sales grew 60% to $4.61 billion. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, sales grew 54%.

– The Company completed its acquisition of Zappos.com on November 1, 2009. Zappos.com contributed approximately $200 million to fourth quarter revenue.

– Amazon Relational Database Service (Amazon RDS), a new web service that makes it easy to set up, operate and scale relational databases in the cloud, was introduced by Amazon Web Services (AWS). Amazon RDS provides cost-efficient and resizable capacity while automating time-consuming database administration tasks, freeing users to focus on their application and their business.

– AWS introduced Spot Instances for Amazon EC2, a new option that allows customers to purchase and consume Amazon EC2 compute resources. With Spot Instances, customers bid on unused Amazon EC2 capacity and run those instances for as long as their bid exceeds the current Spot Price. Spot Instances can enable lower costs and provide significant short-term capacity for customers with flexibility in when their applications can run.

– Both Amazon EC2 and Amazon S3 lowered pricing during the quarter. Amazon EC2 lowered prices up to 15% for all On-demand instance families and sizes, while Amazon S3 introduced new pricing tiers that will reduce storage cost for multi-petabyte customers by more than 15%.

Separately, the Company is announcing that its Board of Directors has authorized the Company to repurchase up to $2 billion of the Company’s common stock. The program allows the Company to opportunistically repurchase its shares from time to time when it believes that doing so would enhance long-term shareholder value. The repurchase authorization does not have a fixed expiration. Purchases may be effected through one or more open market transactions, privately negotiated transactions, transactions structured through investment banking institutions or a combination of the foregoing. This stock repurchase authorization replaces the previous $1 billion stock repurchase authorization, approved by the Board of Directors in 2008.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s expectations as of January 28, 2010. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the Internet and online commerce and the various factors detailed below.

First Quarter 2010 Guidance

– Net sales are expected to be between $6.45 billion and $7.00 billion, or to grow between 32% and 43% compared with first quarter 2009.

– Operating income is expected to be between $275 million and $365 million, or to grow between 13% and 50% compared with first quarter 2009. This guidance includes approximately $110 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded and that there are no further revisions to stock-based compensation estimates.

We are prospectively adopting Accounting Standard Update (ASU) No. 2009-13, Revenue Recognition – Multiple Deliverable Revenue Arrangements, as of January 1, 2010. The impact of the adoption of this standard is included in our first quarter 2010 guidance.

A conference call will be webcast live today at 2 p.m. PT/5 p.m. ET, and will be available for at least three months at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company’s financial and operating results.

These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products sold to customers, the mix of net sales derived from products as compared with services, the extent to which we owe income taxes, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains and develops commercial agreements, acquisitions and strategic transactions, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risks related to new products, services and technologies, system interruptions, government regulation and taxation, payments and fraud. In addition, the current global economic climate amplifies many of these risks. More information about factors that potentially could affect Amazon.com’s financial results is included in Amazon.com’s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and subsequent filings.

About Amazon.com

Amazon.com, Inc. (NASDAQ:AMZN), a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995 and today offers Earth’s Biggest Selection. Amazon.com, Inc. seeks to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices. Amazon.com and other sellers offer millions of unique new, refurbished and used items in categories such as Books; Movies, Music & Games; Digital Downloads; Electronics & Computers; Home & Garden; Toys, Kids & Baby; Grocery; Apparel, Shoes & Jewelry; Health & Beauty; Sports & Outdoors; and Tools, Auto & Industrial. Amazon Web Services provides Amazon’s developer customers with access to in-the-cloud infrastructure services based on Amazon’s own back-end technology platform, which developers can use to enable virtually any type of business. Kindle and Kindle DX are the revolutionary portable readers that wirelessly download books, magazines, newspapers, blogs and personal documents to a crisp, high-resolution electronic ink display that looks and reads like real paper. Kindle and Kindle DX utilize the same 3G wireless technology as advanced cell phones, so users never need to hunt for a Wi-Fi hotspot. Kindle is the #1 bestselling product across the millions of items sold on Amazon.

Amazon and its affiliates operate websites, including www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, and www.amazon.cn. As used herein, “Amazon.com,” “we,” “our” and similar terms include Amazon.com, Inc., and its subsidiaries, unless the context indicates otherwise.

Amazon.com, Inc.

Certain Definitions and Other

Segment Reporting

– We present segment information for North America and International. We measure operating results of our segments using an internal performance measure of direct segment operating expenses that excludes stock-based compensation and other operating expense, each of which is not allocated to segment results. Other centrally incurred operating costs are fully allocated to segment results. Our operating results, particularly for the International segment, are affected by movements in foreign exchange rates.

– The North America segment consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through North America-focused websites such as www.amazon.com and www.amazon.ca. This segment includes export sales from www.amazon.com and www.amazon.ca.

– The International segment consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through internationally focused websites such as www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, and www.amazon.cn. This segment includes export sales from these internationally based sites (including export sales from these sites to customers in the U.S. and Canada), but excludes export sales from www.amazon.com and www.amazon.ca.

– We provide supplemental sales information within each segment for three categories: Media, Electronics and Other General Merchandise, and Other. Media consists of amounts earned from retail sales from all sellers in categories such as books, movies, music, digital downloads, software and video games (including game consoles). Electronics and Other General Merchandise consists of amounts earned from retail sales from all sellers of items in categories not included in Media, such as electronics and computers, devices, home and garden, toys, kids and baby, grocery, apparel, shoes and jewelry, health and beauty, sports and outdoors, tools, and auto and industrial. Other consists of non-retail activities, such as the Amazon Enterprise Solutions program, Amazon Web Services, and marketing and promotional activities, such as our co-branded credit card programs.

Customer Accounts

– References to customers mean customer accounts, which are unique e-mail addresses, established either when a customer’s initial order is shipped or when a customer orders from other sellers on our websites. Customer accounts exclude certain customers, including customers associated with certain of our acquisitions (including www.amazon.cn customers), Amazon Enterprise Solutions program customers, Amazon.com Payments customers, Amazon Web Services customers, and the customers of select companies with whom we have a technology alliance or marketing and promotional relationship. Customers are considered active when they have placed an order during the preceding twelve-month period.

Seller Accounts

– References to sellers means seller accounts, which are established when a seller receives an order from a customer account. Seller accounts exclude Amazon Enterprise Solutions sellers. Sellers are considered active when they have received an order from a customer during the preceding twelve-month period.

Registered Developers

– References to registered developers mean cumulative registered developer accounts, which are established when potential developers enroll with Amazon Web Services and receive a developer access key.

Units

– References to units mean physical and digital units sold (net of returns and cancellations) by us and sellers at Amazon.com domains worldwide – such as www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca and www.amazon.cn, as well as Amazon.com-owned items sold through non-Amazon.com domains. Units sold do not include units associated with certain of our acquisitions or Amazon.com gift certificates.

Cash Flows and Return on Invested Capital

– Free cash flow is cash flow from operations reduced by purchases of fixed assets, including internal-use software and website development.

– Tax benefits relating to excess stock-based compensation deductions are reported as financing cash flows.

– Return on invested capital is trailing-twelve-month free cash flow divided by average total assets less current liabilities (excluding current portion of our long-term debt) over five quarter ends.

Net Sales

– Revenue is generally recorded gross for sales of our own inventory and net for sales by other sellers. Amounts paid in advance for subscription services, including amounts received for Amazon Prime and other membership programs, are deferred and recognized as revenue over the subscription term.

– For our products with multiple elements, where a standalone value for each element cannot be established, we recognize the revenue and related cost over the estimated economic life of the product.

Cost of Sales

– Cost of sales consists of the purchase price of consumer products and content sold by us, inbound and rings shipping charges, packaging supplies, and costs incurred in operating and staffing our fulfillment and customer service centers on behalf of other businesses.