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Retailers' outlook for 2004 restrained

Holiday shopping was at its best since 1999. But without jobs, major stores don't see a solid resurgence.

Published January 13, 2004

NEW YORK - The nation's big retailers termed their holiday shopping season "fairly strong" Monday. But few were celebrating as 12,500 of the nation's top industry executives gathered this week for their annual post-mortem.

"We think consumer spending is going to hold up for the first half of 2004," said Lee Scott, president of Wal-Mart Stores Inc., the nation's biggest retailer. "But the entire year looks to be only modestly better than 2003."

A recovering but still fragile economy and changes in discretionary spending are the big concerns.

The National Retail Federation predicted the Commerce Department on Thursday will report that sales of general merchandise, apparel and furnishings rose a healthy 5.7 percent or more in November and December. That would be retailers' best performance since 1999.

But the federation's forecast for 2004 is a more modest 5 percent gain - with much of it in the first half fed by tax cuts and a change in payroll withholding that will leave workers with a bit more take home pay. Still the 5 percent gain would be a modest increase over the 4.3 percent gain expected to be reported for all of 2003.

"Our forecast is based on employment picking up, and in December we just learned that did not happen," said Rosalind Wells, the trade group's chief economist. She suspects retailers were partly to blame for the slow job growth as they hired fewer seasonal workers.

"The tax cuts and withholding changes are helping, but the lack of job creation remains a very big question mark," said Walter Loeb, an industry financial consultant.

"There are still a lot of people out of work or working paycheck to paycheck," said Kurt Barnard, president of Barnard's Retail Forecast. "You cannot have a jobless recovery."

Retailers breathed a sigh of relief over their holiday performance. Many rely on the two-month season for up to a third of their annual sales and half of their annual profits. High-end chains such as Nordstrom, Neiman Marcus and Tiffany & Co. did very well. So did jewelers. But discount stores and moderately priced stores that rely on the middle and working class settled for modest or minimal sales increases. Toy stores suffered the most because of few hot new products and cut-throat price wars between Toys "R" Us, FAO Schwarz, Wal-Mart and Target.

Although there was widespread discounting at the end of the season, prices were not slashed as deeply. Nor were there as many unsold leftovers. That's because retailers were more conservative about building up their inventory for the holidays.

In the longer term, some experts said retailers have lost discretionary spending to Americans' infatuation with high tech gadgets, in-home entertainment and health. Many families have sharply increased their monthly budgeted spending on such extras as cell phone service, Internet connections, cable TV and health club dues.

One expert said retailers have yet to come to grips with another little-noticed trend. The percentage of women in the workplace has started to slip after rising for four decades. That has repercussions for the food industry, restaurants and apparel sellers.

"A bit more than 60 percent of adult women work now, but it will never hit 70 percent," said Harry Balzer, a vice president with NPD Group. "That trend is over."

- Mark Albright can be reach at or 727 893-8252.

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