Holidays bring cheer to retailers Reliance on credit may hurt later

December 29, 1992|By Michael Dresser | Michael Dresser,Staff Writer

Santa Claus was good to retailers this Christmas season as he made his rounds in a sleigh of plastic, pulled by reindeer named Visa, MasterCard and American Express.

How good sales were won't be known for a week or two, but industry analysts counted few lumps of coal in merchants' stockings -- a stark contrast with the blackened 1990 and 1991 seasons.

Hailing a last-week surge, the Maryland Retail Merchants Association projected yesterday that retail sales in the state jumped 6.5 percent over last year's holiday season. The organization had previously predicted a 5 percent gain, said association President Tom Saquella.

The forecast matches the expectations of the National Retail Federation and industry analysts, who were busy yesterday making upward revisions to their pre-Christmas projections.

The good news for retailers -- and the general economy -- could be short-lived, however. Early indications pointed to a retail recovery financed largely with credit cards, which will likely be put on ice after January bills come in.

"I have never seen the plastic fly like it did this Christmas," said a surprised Kenneth M. Gassman Jr., who follows retail stocks for Davenport & Co. in Richmond, Va.

"I said it was going to be a cash Christmas. Boy, was I wrong on that," said Mr. Gassman. "The consumer never learns."

Shoppers Charge Accounts of Jersey City, N.J., which administers private label credit card programs for independent retailers, reported yesterday that its charge card sales for the 1992 holiday season climbed 15.5 percent over last year's.

Earlier, MasterCard International reported a 21 percent gain in holiday credit card charges through Dec. 19.

Meanwhile, purchases by check appear to have lagged. Through Dec. 19, check purchases were down 0.7 percent nationally and 2.6 percent in the Baltimore area, according to TeleCheck Services. TeleCheck, the nation's largest check acceptance company, expects the final figures to show a gain in the low single-digits, said its senior economic adviser, William Ford.

"I think what you see is consumers responding to the euphoria of the Clinton victory," said Carl Steidtmann, vice president and chief economist of the Management Horizons division of Price Waterhouse, an accounting firm. "It means the first couple months of next year are going to be a difficult time for retailers."

But yesterday, retailers in Maryland and across most of the country were still savoring the sweet smell of cash in the till.

"The last 10 days, they were spectacular," said John Hall, owner of Patowmack Toys in Columbia Mall. He added that the late rally left him with a double-digit increase over the 1991 holiday season even though he ran out of some popular items before Christmas Eve.

Luxury items also sold briskly, a sea change from the frugal days of 1991.

"We had our best December ever," said Carl Fisher, owner of Kent Fisher Furs in Towson and Baltimore. He said those gains were spurred by promotional pricing, but added that "our volume more than made up for any adjustments."

Giant national retailers were just as pleased as the little guys.

Duncan Muir, corporate spokesman for J. C. Penney & Co., said the Dallas-based department store chain was running just below 10 percent ahead of last year's comparable-store sales.

"As expected, the last couple days were very strong," said Mr. Muir, who added that Penney's did not have to resort to heavy sales promotions to clear out merchandise. "That should translate into attractive earnings," he said.

At Seattle-based Nordstrom Co., spokeswoman Cheryl Engstrom said sales were robust throughout the department store chain even as its stores in recession-ravaged Southern California showed gains over last year. "The East Coast did really great," she said. "Our Baltimore store continues to be a very good performer."

The good news did not stop on Christmas Eve. Mr. Gassman said strong sales continued through the three-day weekend as the "boredom factor" set in and shoppers rushed to the malls with Christmas money burning their hands.

There were strong differences from region to region, however. Mr. Steidtmann said the Midwest and Southeast outperformed the national sales average, while the mid-Atlantic and New England states were running slightly below.

"The California market did very poorly," he said.

Mr. Steidtmann said consumer spending will be cramped by a $25 billion reduction in income tax refunds because of the Bush administration's cut in 1992 withholding taxes. "You're going to be going back to the old withholding schedule too, so it's a bit of a double whammy," he said.

While the impact of the tax gambit will be significant, Mr. Steidtmann said, he doubts it will stop the recovery in its tracks.

"There's still a good deal of momentum in other parts of the economy," he said.

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