Optimism persists, tempered by realism

HARD LESSONS OF '91 DRIVE RETAILERS

January 02, 1992|By Michael Dresser

Maryland retailers waved goodbye yesterday to 1991, an old acquaintance many would rather forget. They greeted 1992 with wary optimism and a daunting realization that competition here will become more intense than ever this year.

For most, 1991's holiday shopping season was a disappointment. For some it was clearly a debacle. But optimism springs eternal in the mercantile heart, and most retailers expect a midyear economic rebound to bring better sales and a merrier Christmas season in 1992.

Diane Meyer, owner of the Silver Heron, a three-store chain that sells inexpensive jewelry in Columbia, Waldorf and Wheaton, said her stores' sales were down about 4 percent from last Christmas season. But now, she said, "I'm seeing some faint inklings of a turnaround in the spring."

At Discoveries, an eclectic gift shop in Columbia Mall, some 1,600 fewer paying customers visited the store during the week before Christmas, putting a bit of a damper on what had been "a great year," said Gary Rubenstein, the manager. But "morale is good among the merchants" at the malls, he said, adding that "I'm looking forward to this year."

Their views seem to represent the consensus among local retailers, at least among the survivors. For others, 1991's dismal holidays meant there might not be much of a 1992. Casualty reports are already coming in, with Zale Corp. announcing Monday that it would close 400 of its 2,000 jewelry stores and Sterling Optical reporting Tuesday that it would file for Chapter 11 bankruptcy and has sold most of its 200 company-owned optical stores. January will bring more such announcements.

Some retail industry analysts are less optimistic than the folks they analyze. They contend that 1991's woes were part of a long-term trend toward more conservative spending habits. Any rebound, they say, will be anemic.

"We are in the midst of a gigantic social attitude transformation of the American public," said Kurt Barnard, publisher of Barnard's Retail Marketing Report. "The yuppie is dead -- if the yuppie ever existed."

An increasingly frugal American consumer turned away from traditional outlets such as department stores and shopped at The Gap, Lerner's, warehouse clubs and discount stores, he said, adding that "this will continue to be the case." Mr. Barnard expects this year to be a replay of 1991, with more of the same in 1993.

A. Gary Shilling, a well-known economist and forecaster, said that trend toward greater frugality will continue through most of the 1990s as the national savings rate swells into double digits within five years. Middle-market retailers such as Sears and J. C. Penney Co. will be in "big trouble," he said, while the winners will be discounters, such as Wal-Mart, which let consumers who have been pushed down the economic ladder shop for value "in an atmosphere where they feel they are preserving their middle-class dignity."

Essentially, the difference between optimists and the pessimists whether they believe this is a traditional cyclical downturn.

Count Philip Rockwell, manager of the J. Riggings menswear store in Columbia, as an optimist. "I've got faith in the president that he's going to get the economy rolling again," he said, adding that next Christmas he

expects to "blow the numbers out," with sales gains of 30 percent to 50 percent.

Budd Bugatch, institutional research director at Ferris Baker Watts in Baltimore, agrees. "Recessions do not last forever, and I think we are in the early phases of beginning to emerge from this one," he said.

"I think next Christmas could be a very good one," he added.

History is on their side. If the current recession acts like most recent recessions, their hopes may well be realized. But some retail industry observers wonder whether this downturn will follow the old rules, pointing to high debt levels and the aging of the once free-spending baby boom generation.

"We are probably entering a new economic era," said Alice Bird McCord, vice president for research of the National Retail Federation, who suspects 1992 will be a repeat of 1991. "There aren't any rules. They're developing right now."

Ms. McCord said she expects the shakeout in the retail industry to continue as too many stores compete for too few dollars. "You have to take business from someone else," she said. "It makes those companies that are dominant more dominant."

For Maryland merchants, 1992 might well be the year of the dominant merchant. Wal-Mart and Home Depot, two of the most respected and feared merchants in the business, will each spend its first full year of undercutting competitors here. And Giant Food, the region's leading grocer, is expecting another year of "very intense competitive situations," said Senior Vice President David Sykes, including challenges from health and beauty heavyweights F&M Warehouse, which opened a new store in Columbia last month, and Drug Emporium.

The most significant new player in the Baltimore area in 1992 will be Nordstrom, the department store-sized fashion retailer that will open its doors at Towson Town Center Sept. 11, almost a year after it made its Maryland debut at Montgomery Mall. With Nordstrom's coming, the competition in the service arena could become just as fierce as any grocery chain price war. The Seattle-based retailer is famous for its coddling of customers, and well-loved Nordstrom shoppers are likely to take their newly raised expectations into other stores. Woe to the retailer who takes the glow from their faces.

John Hall, owner of Patowmack Toys in Columbia Mall, is preparing to meet the growing demand for attentive service. His mom-and-pop toy store already offers such service as gift-wrapping, he said, but this year he plans to flaunt it.

"This year, the wrap is going to come out from under the counter and be seen by the consumers," he said.

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