Retailing's struggle for sales likely to continue

January 18, 1998|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

If anything, last year's rosy economy should have kept the registers ringing from malls to outlets to discount centers. But consumers had other ideas, putting money into savings, for one, or ferociously hunting bargains.

Sales in Maryland stores merely inched up in 1997, reflecting national figures and leaving retailers fighting harder for every dollar. This year, little is expected to change.

"Retailing's just lackluster," said Mark Millman, president of Lutherville-based Millman Search Group, a retail consulting firm. "It's not as rosy as people predicted earlier this year, and that will continue. I'm not expecting any change until the turn of the century."

Retailers shouldn't expect the double digit sales increases of the 1980s anytime soon, say analysts, who predict it could even be tough to beat the 4.5 percent increase in retail sales the Commerce Department reported for 1997 through November.

Income from Maryland's sales tax on consumer items -- a measure of retail spending -- rose 2.2 percent during the first four months of the current fiscal year -- August through November -- the Maryland State Comptroller's said. Prior to that, the fiscal year ending in July posted an increase of 3.9 percent over the previous fiscal year.

"What we're seeing here is reflective of what's going on around the country," said Marvin A Bond, assistant comptroller.

Despite low unemployment, high consumer confidence and a robust stock market, buying habits have changed, consumer debt has increased and retailers are using heavy discounts to compete. "Shoppers can't be fooled easily. They want good stuff for a fair price," said J'Amy Owens, president of the Retail Group, a Seattle-based retail consultant.

Some economists are counting on pent-up demand improving the picture somewhat in Maryland in coming months. The comptroller's office anticipates a 3.4 percent increase in consumer sales tax revenues through next July, compared with December 1996 through July 1997. And the Regional Economic Studies Institute at Towson University is calling for sales to surpass last year's by 3.5 percent.

But retailers are making plans now, based in large part on a disappointing end to 1997, when the crucial holiday selling season failed to live up to expectations. It can generate up to 40 percent of annual sales.

Millman, whose national firm places retail executives, has seen some clients curtail expansion plans based on sales that barely kept pace with 1996 figures. Next year, retailers will likely limit expansions, new outlets and new stores, he said.

Some, he said, "are barely making their projections and rethinking expansion and growth, and I see that as an indication of turmoil and consumer indifference. With that kind of dismal growth, they're not looking to throw a lot of money out there."

Some segments of retail should fare better than others, with home furnishing and computers expected to post respectable sales. But consumer electronics and apparel retailers will likely struggle.

That's been the case at Manor Shop Menswear in Dundalk and Westminster, where sales last year slid about 5 percent, said Ken May, general merchandise manager. But he considers himself fortunate: Some independent retailers suffered through slumps of as much as 30 percent, he said.

"The independent is getting hammered," May said. "The department stores and the discounters are siphoning off from the independents. The pie is getting chopped up."

Manorwear has responded by becoming more niche-oriented, offering big and tall as well as regular sizes. For 1998, new initiatives from the men's apparel retailer will include offering discounts to customers who buy several items and opening a third store.

"It's grow or die," May said. "It's a new economy we have here. It's not as retail-driven as it was 10 years ago. The [baby] boomers fueled the retail madness through the '60s, '70s and '80s, but they've cut back with other things on their mind, kids in college, funding their retirement funds."

Restrained consumer spending should help discount and off-price retailers and moderately priced department stores. But middle-range and apparel stores will likely struggle, said Kurt Barnard, president of Barnard's Retail Trend Report, a forecasting firm based in Scotch Plains, N.J. Upscale stores, such as Tiffany & Co., will continue to do well, he said.

"They are riding the back of six-or seven-year ride on Wall Street which has made people very wealthy and able to buy anything they like without having to ask the price," Barnard said.

The coming year will likely be marked by more bankruptcies, mergers and acquisitions, said Bruce VanKleeck, president of member services for the National Retail Federation.

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