Retailers upbeat despite outlook

Analysts are gloomy about holiday sales

stores count on spirit

November 21, 2001|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

The Discovery Channel Store is counting on shoppers' buying educational toys that bring families together. Kmart expects consumers will be looking for savings, all under one roof. And The Limited Inc. anticipates big enough crowds in its stores, including Limited and Victoria's Secret, to hire as much extra help as last year.

All say they're well-positioned not only to survive, but also to thrive in a holiday shopping season that analysts expect to be one of the worst for retailers since the 1991 recession.

The retailers' optimism comes amid a backdrop of a slumping economy weakened further by the Sept. 11 terrorist attacks.

"This easily is shaping up to be the worst holiday season we've had in 10 years," said Richard Giss, a partner in the retail services group of Deloitte & Touche LLP in Los Angeles. "Sales could actually be down this year, but our best expectation is they will be flat. ... The season was already starting to shape up as a disappointing season," even before Sept. 11.

Analysts point to deteriorating consumer confidence - the lowest since 1987 - rising unemployment, concern over job security, instability in the stock markets and negative corporate earnings reports.

"You put all that together, and the consumers have put their hands in their pockets and said they have to start getting conservative about how they spend their dollars," Giss said. "The good news for retailers is that there are dollars to be spent. The problem is, consumers have decided not to spend them."

Shoppers plan to spend $1,564 per household, 7 percent less than last year, on gifts, travel, decorations and other expenses, according to the American Express Retail Index released yesterday.

Other analysts and trade groups concur, for the most part, with Giss, though predictions vary. Market research firm Retail Forward Inc. expects sales growth of 1.5 percent during the fourth quarter. The National Retail Federation expects November and December sales to rise between 2.5 percent and 3 percent, down from a 3.9 percent gain last year.

The Bank of Tokyo-Mitsubishi, which tracks weekly and monthly retail sales, says November and December sales could rise as much as 4 percent though, thanks to the federal tax rebates, lower energy prices and pent-up discretionary income as people travel less. In the wake of Sept. 11, consumers are more focused on family, community and security, said Michael P. Niemira, a bank vice president.

"As we move into the Christmas season, those new consumer priorities will be ever more present," he said. "Gift giving will be an even more important demonstration of that spirit this year."

Retailers, which can reap one-third of their yearly sales and half of their profit during the four frenetic weeks between Thanksgiving and Christmas, are counting on that spirit.

"This year, frankly, is going to be a big family year, a big year for consumers looking for things that the whole family can enjoy," said Pamela Rucker, a spokeswoman for Discovery Channel Stores, a chain of 170 specialty stores that is promoting its educational toys and telescopes. "The mood of the country can play to our strengths."

Discounter Kmart, too, expects the national mood to help sales as consumers center their activities - and buying - on the home and look to save money. Board games, videos, holiday decorations and other items for the home are expected to be hot sellers at the nation's third-largest discounter.

"One thing we're anticipating is that people want to spend less time out of the home this year," said Abigail Jacobs, a Kmart spokeswoman. "For shoppers who come to Kmart, they can get all their stuff in one place and don't have to traipse through the mall."

And The Limited plans to hire 75,000 holiday workers - the same as last year.

"The business is going to happen," said Theo Killion, vice president human resources for stores for Limited Inc. "We have a product offering that resonates with the customer."

Few experts disagree this year about the heightened level of retail competition.

"It's not going to be an easy Christmas season," said Robert N. Wildrick, chief executive officer of Jos. A. Bank Clothiers Inc., a men's apparel chain that has been outperforming many other retailers for several months. "People will have to work hard for every sale."

For some, that will mean offering deep discounts.

"We're seeing some signs already that retailers are turning to various promotions a little sooner than usual, and cutting prices more deeply sooner - not waiting until the last week," said Frank Badillo, a senior retail economist with Retail Forward Inc., formerly part of national accounting firm PricewaterhouseCoopers, in Columbus, Ohio. "We can expect heavy emphasis on price cutting."

As has been the case for much of the year, the discounters are expected to fare best this season as consumers watch spending more closely, leaving department stores and specialty retailers to struggle.

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