The holiday season always turns the spotlight on retailers and the glare could prove too much for some merchants already under close scrutiny, industry analysts said.

Changes could be coming for retailers like Gap Inc. and Pier 1 Imports Inc. that have struggled with falling same-store sales, while other retailers, like jeweler Zale Corp. will be watched to see if they can rebound from missteps during last year's holidays.

Even Federated Department Stores Inc. is under a microscope to see how successful it has been in converting a slew of recently acquired stores to the Macy's name.

The November-December holiday shopping season generates from 25 percent to 40 percent of annual sales for retailers.

It's more significant for some retailers than it is for others. There definitely is seasonality to the retail sector, said Karen Ghaffari, senior director at credit rating agency Fitch Ratings.

Clothing retailer Gap has posted lower same-store sales - a key measure capturing sales at stores open at least a year - every month but one this year. Some analysts have expectations for a rebound as Paul Pressler enters his fifth year as chief executive.

But some warn that Pressler could be gone if another dreary season comes and goes.

Assuming sales do not improve in the fourth quarter, we think change at the top could take place in 2007, Jeff Black, analyst at Lehman Brothers, said in a research note earlier this month.

Black expects same-store sales to turn positive in the fourth quarter, with the retailer revamping its denim and women's offerings. He upgraded the stock to overweight from equal weight on September 13.


If Gap's Pressler is on the hot seat, Pier 1 management may be staring at an even hotter fire this holiday.

For the past six quarters, Pier 1 has posted losses, pressured by a slowdown in consumer spending, a cooling U.S. housing market and increased competition.

If the business does not improve by year end, the home retailer could be in line for more store closings, a management change, or even find itself up for sale, analysts said.

If results don't start to pick up by the end of this year, the company will need to make some serious changes, or its financial condition will deteriorate, said BB&T Capital Markets analyst Laura Richardson, who has a neutral rating on Pier 1 stock.

Some companies in the holiday spotlight have already made management changes.

Last Tuesday, Sharper Image Corp. said founder Richard Thalheimer stepped down as chairman and CEO and named turnaround specialist Jerry Levin to run the company while a new CEO is sought.

Sharper Image, which lost $15.6 million in its last fiscal year, has cut its workforce and started selling more items made by outside vendors instead of relying on products like its own Ionic Breeze air purifier.

RadioShack Corp. in July hired Julian Day as its chief executive and its stock soared on hopes that Day's experience with struggling retailers like Sears and Kmart would help with RadioShack's revamp.

RadioShack has been hurt by slumping mobile phone and product sales, a key profit driver.


Warehouse club operator BJ's Wholesale Club Inc. is also in the spotlight, as it continues to struggle against two of the toughest players in the retail sector - Costco Wholesale Corp. and Wal-Mart Stores Inc., which owns Sam's Club.

A series of sales and profit disappointments has boosted speculation that BJ's could be a prime takeover target as private equity groups look for chains with attractive real estate portfolios and are turnaround opportunities. BJ's has repeatedly declined to comment on such rumors.

On the department store front, the changeover to Macy's at Federated will be watched, not only for how Federated does but for any impact the change will have on competitors.

Dillard's Inc., for example, could find the going tougher against a strong Macy's chain than it did against somewhat depleted May stores, said Lehman Brothers analyst Robert Drbul.

I think incrementally things are going to get a lot more challenging for them, and we've been pretty impressed with what we've seen out of Federated, Drbul said.

Other retailers being watched include Zale. After posting lackluster holiday sales last year, Zale is shifting its focus back to the middle-class consumer, a move analysts say should reap immediate returns.

Analysts want to see if teen retailer Aeropostale Inc. can be successful even without last holiday season's aggressive discounting of up to 50 percent off apparel.

And online, the stakes are raised this holiday season for's discount shipping program, Amazon Prime, which debuted in early 2005. The program has proven costly to Amazon even as it claims that it fosters loyalty and spurs shoppers to buy more from the Internet retailer.