Last year, the Persian Gulf crisis. This year, the economic crisis.
The nation's retailers, operating with lean inventories and xTC reduced staffs, are soberly prepared for slim profits this Christmas shopping season. A sales gain of 2 percent to 4 percent over the dour results of last year's holiday season is predicted by many Wall Street analysts.
Though enthusiasm is modestly better than a couple of months ago, analysts somberly note that this year there are six less shopping days between Thanksgiving and Christmas.
The equities of the retailers, up better than 50 percent in value this year on the hope that recession would end quickly, have lately sputtered along with harsh economic reality. Both store sales and stock appreciation the remainder of this year seem to favor stores which emphasize "value" shopping geared to a recessionary pocketbook.
"Consumers don't visit six to eight stores anymore, but take an hour to go to a store which they believe will have exactly what they want," explained Steve Kernkraut, analyst with Bear, Stearns & Co. "That trend has helped stores such as The Gap and The Limited because they have strong market identities."
"In the 1980s, people bragged that they'd bought a Polo shirt, but in the 1990s they brag that they got a Polo shirt for a good price," noted Philip Abberhaus, analyst with A.G. Edwards & Sons. "Americans under 55 years of age are more price-conscious."
With this emphasis, the 1991 Christmas season will probably be "OK, and not a big disaster," predicted Jennifer Uhrig, portfolio manager of the $30 million-asset Fidelity Select Retail Portfolio, up 53 percent this year.
Stocks of retailers favored by Kernkraut include The Gap Inc., which he believes has "captured America's imagination" with basic fashions featuring flair and reasonable price; The Limited Inc., which additionally offers more fashionable choices at its Limited Express; and Charming Shoppes, which draws women shoppers interested in moderate price.
Emphasizing the desire for value on the part of shoppers, Kernkraut also likes K mart, which should reap rewards from its store renovations in its 1992 earnings; and Wal-Mart Stores, which has been the class of retailing for a decade and should do well even though its annual growth rate will likely slip from 30 percent to 20 percent.
Nordstrom Inc. is rated a "hold" because many of its stores are located within the weak California economy.
Sears, Roebuck provides controversy with its ongoing strategy for changing stores and image. Kernkraut is neutral on its stock because the plan is so long-term; Abbenhaus likes its dividend, but expects tough sledding; and Uhrig is positive on its low stock price and potential to improve soon.
J.C. Penney & Co. is rated "hold" by Kernkraut and Abbenhaus. While adding a "value emphasis" to its merchandise, it must do a balancing act to retain traditional department store customers.
Melville Corp. is a strong recommendation of Abbenhaus, based on its turnaround potential, strong management and impressive size. Other hold suggestions include Dillard Department Stores, May Department Stores and Venture Stores, because Abbenhaus believes the investor should wait until their stock prices come down a bit.