A ho-hum Christmas Flat sales: Even though the Christmas shopping season is starting earlier than ever, most analysts say sales will be flat or marginally better than last year.

November 19, 1995|By Alec Matthew Klein | Alec Matthew Klein,SUN STAFF Sun staff writer Jay Hancock contributed to this story.

Something is amiss when the reindeer decorations trot out before the turkey signs.

Retailers, preparing earlier and earlier every year for the holidays, are bracing for an uncertain Christmas selling season, the most crucial time of year to move merchandise and make a profit.

The early indications, according to analysts, point to ho-hum holiday results.

"Santa's sleigh will be a little lighter this year," said retail analyst Kenneth M. Gassman Jr., who is forecasting a modest increase -- 3 to 4.5 percent -- in holiday sales over last year, when factoring in inflation.

These are strange times. Interest rates are relatively low, inflation is in check, unemployment is dropping and consumer confidence is strong. But, Mr. Gassman said, "There are other factors which are dampening consumer spending. Wage gains are modest, consumer debt levels remain high and savings rates remains modest. To consumers, it feels like a recession."

To Marylanders, it may seem particularly bad.

For the 12 months ended in June, state retail sales rose at a rapid clip -- 7.5 percent -- according to Ann O'Brien Franklin, chief economist for the state Board of Revenue Estimates. But from July through September, the most recent results available, sales rose by only 2.7 percent.

"Consumers are pretty much tapped out," Ms. Franklin said.

And they're worried, what with the uncertainty over the fallout from the federal shutdown stemming from the budget battle between President Clinton and the GOP-led Congress. The question remains, will government workers, so many of whom live in Maryland, shop?

"It's such a volatile time," said Charles W. McMillion, president of MBG Information Services, a Washington-based business analysis and forecasting firm, which is predicting holiday sales will be no better than last year, or 2 to 3 percent lower including inflation.

"If government workers don't get retroactive pay and this thing lasts longer and longer, if some of our local contractors either have their contracts reduced or eliminated or if they have troubled getting payment -- there's just so many unknowables today," Mr. McMillion said.

And it's not just the brouhaha in Washington.

Employment has shrunk in the Baltimore region with an estimated 4,100 fewer jobs in September 1995 than there were a year ago.

The region, symbiotically connected to the nation's capital, has been rattled by federal cutbacks in spending and employment. Even the touted economic "soft landing" hasn't had a significant impact on the area, analysts say.

In the case of building construction, interest rates don't mean much when there's plenty of empty office space and little need to finance more construction in a region that overbuilt during the go-go '80s.

There is, however, a potential upside to all the doom and gloom.

It's simple mathematics: Retailers with warehouses of goods plus reluctant consumers equals significant discounts.

After all, the merchandise has to move.

"The positive spin to this is that this will be terrific Christmas for consumers," Mr. McMillion said. "Retailers will be cutting prices very significantly pretty much across the board."

They may not have a choice. Most retailers, which generate from 30-50 percent of annual sales during the holidays, are carrying larger holiday inventories than they did last year, according to a survey by the Maryland Retailers Association, which is expecting a "decent but not spectacular" Christmas.

The outlook is not much better nationally.

36 percent to spend less

A recent ABC News/Money magazine poll showed that 36 percent of Americans plan to spend less money on gifts for friends and family this Christmas, while only 13 percent plan to spend more.

Sears, Roebuck & Co. Inc., one of the nation's leading retailers, has apparently identified the same trend, prompting Chairman Arthur Martinez to declare recently that December sales growth will probably be "a little lower" than the 7.9 percent increase a year ago in comparable-store sales, a key performance indicator that measures sales in stores open at least a year.

"For many retailers, it does not bode well for their profits," said William F. Ford, senior economic adviser for TeleCheck Services Inc., a Houston-based check authorization concern that closely tracks store results.

"It's the trend in consumer behavior. Even though the basic economic factors would support more spending, consumers this year have been remarkably cautious. There's a growing value-consciousness. Consumers are getting more and more into good value for the money."

That should benefit big discounters like Wal-Mart and Target at the expense of smaller chains and boutiques. But even the major chains are modest about Christmas: Minneapolis-based Target is projecting comparable-store sales to increase in the mid-single digit range.

"We're reasonably optimistic about the holiday season," said Susan M. Eich, a spokeswoman for Target, which is planning a major push into the Baltimore-Washington market.

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