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Holiday chill
By MARK ALBRIGHT Wilson's Leather cut bomber jacket and suede skirt prices by 50 percent last Wednesday. Lillie Rubin is touting 50 percent price cuts. Florsheim Shoes is staging a two-for-one sale. And Ann Taylor Loft clearance merchandise prices have been cut by another 40 percent. "We needed something to jump-start the holidays because of this economy," Wilson's assistant store manager Scott Ward said. "Usually business is good the week before Thanksgiving. I sure haven't seen it." A walk through Tyrone Square Mall in St. Petersburg shows how retailers are responding to a faltering economy, rising unemployment and a war on terrorism, all threats to their critical holiday shopping season. The biggest move: Clearance sales that used to take place closer to Christmas Day started in November. "This Christmas, it's all about price," says Carey Watson, senior vice president of advertising for Miami department store chain Burdines. Nationally, retail sales have been in a funk all year. Retail experts forecast the holidays will be just as bad if not worse. The National Retail Federation says it is "fairly optimistic" in predicting a modest 2.5 to 3 percent gain in sales of general merchandise, apparel and furniture. But some experts are forecasting the first decline in Christmas holiday sales since World War II. There's a lot at stake. Many retailers count on holiday spending for up to a third of their revenues and half their annual profits. The toy industry gets half its annual business in the last three months of the year. Because consumer spending is two-thirds of the Gross Domestic Product, Christmas spending is a barometer of whether Federal Reserve efforts to stimulate the economy have gained traction. So far shoppers, however, remain tightfisted. Deloitte Research surveyed 5,000 consumers: 8.6 percent of them said they would spend more for the holidays, 61.5 percent said they would spend the same, and 29.9 percent said they planned to spend less. "It was the most negative variance we've ever had," says Carl Steidtmann, the company's chief economist. "The jobs lost this fall in the travel and tourist industry alone are big enough hits to set the stage for retailers' worst holiday sales performance in a decade." Other forces are behind the plethora of preseason clearance sales. "There has been a major shift in buying patterns," says Kurt Barnard, an Upper Montclair, N.J., economist who publishes Barnard's Retail Trend report. "Americans no longer consider fashion a priority. They do, however, consider low prices the priority in buying anything." He offers two holiday sales forecasts: Sales at discount stores led by Wal-Mart and Target will increase 2.5 to 3.5 percent. Sales in department and mall specialty stores will be flat or decline as much as 4 percent. Indeed, Burdines parent Federated Department Stores Inc. has told Wall Street it expects its sales to drop 7 to 10 percent during the holidays. The forecasts of falling sales are not only because of a stalled economy. Prices of electronics and apparel have been falling all year. So retailers are wrestling with price deflation of 1.5 to 2 percent. That means stores have to sell more stuff to generate the same revenue. The longer they keep merchandise on the shelves, the lower the price it will fetch. That wasn't so bad during times of inflation. But in times of deflation, profits are hammered harder. So retailers must dump unsold goods sooner. "You would be amazed at how much inventory stacked up just because all the malls closed for a couple of days after the terrorist attacks," Steidtmann said. "I'm amazed at how much of it is still there." Retailers began canceling holiday orders the following week. But manufacturers merely diverted many of the shipments to off-price chains and liquidators who can sell the goods at lower prices. Price deflation gives credence to retailers' claims that the best prices and selection will be before rather than after Christmas this time. With expenses squeezed, retailers are not hiring as much temporary help this year. Typically, retailer payrolls swell by a third for the holidays. There are signs some of the gloomy forecasts may be overblown. Americans are not traveling as much. So some economists think discretionary income may be diverted to holiday gift giving, especially by families with young children. Once prices dropped sharply in the past month, many retailers say business perked up. Auto sales soared in October, thanks to no-interest loans. Gas prices have been dropping. Despite their Christmas frugality, consumers' day-to-day purchasing behavior has remained robust. "The outlook is gloomy, but not hopeless," said George Rosenbaum, chairman of Leo J. Shapiro and Associates, a Chicago company many national retail chains hire for market research. "Consumers' worst fears of inflation and rising prices have not appeared. They have noticed this pricing wonderland out there. They tell us they are planning vacations and big-ticket purchases again. However, they have not connected this to their Christmas spending." The muddled outlook has perplexed many retailers at a time when they normally do most of their hand wringing. Stein Mart Inc., which reported a loss in the third quarter, dramatically cut its inventory and warned analysts that fourth-quarter net income will be only half of last year's. The Jacksonville off-price chain also is bulking up its newspaper supplements. "Our value message is going to be much stronger," said Susan Edelman, the chain's investor relations director. "But we're really sailing in uncharted waters." Some turned to creative discounting just to move goods and generate cash. In addition to half-price clearance sales, Brooks Brothers, for instance, has been issuing $25 gift certificates for every $100 customers spend there. Dillard's Inc. has been slashing its inventory for the past year to recover from poor performance in 2000. "I don't think it's going to be an outstanding holiday, but I think we'll be okay," said Gene Baker, Dillard's vice president of stores for the Southeast. Apparel retailers hope some trends will pull them through. The bloom, however, is off luxury goods such as pashmina, a pricey type of cashmere scarf that was the must-have item of Christmas 1999 and 2000. "Pashmina is over," Nordstrom spokeswoman Meredith Darnall said. Many women are buying boots. JCPenney is selling washable suede and wool sweaters. Denim is selling well to all age groups. Among young women, the bare midriff look has propelled sales of skin-tight pants and rhinestone belly belts. Neiman Marcus is pushing fur-collar sweaters. Research suggests Americans are staying closer to home, so retailers are pushing nesting goods. Music, books and hobby goods are expected to be bestsellers. Burdines added telescopes and a collection of pet toys to its gift selection. Beall's has a $16.95 dessert set that eliminates the need for a culinary blowtorch in making creme brulee. For people who grill outdoors at dusk, Williams-Sonoma has a $27.95 chef's fork with a lighted digital meat thermometer. Retailers scrambled to stock just about anything in red, white and blue to meet unexpected demand. Candles, clothing and car flags are the big items. Nordstrom added a variety of flag pins priced from $15 to $95. Most area malls are selling $10 United We Stand calendars with proceeds going to a New York disaster victims fund. International Plaza in Tampa is selling plenty of $1 patriotic shopping bags. The new upscale mall that opened Sept. 14 in Tampa boasts a partridge in a 30-foot pear tree display for the holidays. But local malls that lost business to the flashy newcomer are fighting back. Tyrone Square Mall, for instance, normally doesn't advertise during the holidays. This year, the St. Petersburg mall is pouring $100,000 into a TV, radio and newspaper campaign. "In light of the economy and everything else that's happened to us since Sept. 11, we have to be a lot more aggressive," mall manager Scott Rolston said. -- Mark Albright can be reached at albright@sptimes.com or (727) 893-8252.
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From the Times Business report
From the AP
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