Seasonal retailing picture brighter

As gas prices fall and disasters fade, shoppers step up

November 24, 2005|By ANDREA K. WALKER | ANDREA K. WALKER,SUN REPORTER

Expectations for the holiday shopping season seem to be on the rebound.

As the $4 trillion retail industry enters the season that can make or break its year, it's breathing a sigh of relief as consumers, more confident in the economy, seem to be heading back to the stores.

With gas prices coming down and harrowing events that shook the moods and wallets of consumers, such as hurricanes, having faded from the headlines, analysts are predicting a more robust season than they once expected.

"It's amazing how quickly people can put negative incidences behind them," said Bill Hampel, chief economist for the Credit Union National Association in Washington. A survey it conducted of 1,000 people early this month found that 51 percent of people plan to spend about the same as last year.

Earlier this week, the National Retail Federation raised its holiday outlook for the first time in its history to 6 percent, up from 5 percent, after seeing a leap in consumer spending. Year-over-year retail sales jumped 7.2 percent in both September and October.

The Conference Board reported yesterday that consumer confidence began to rebound this month after hitting a two-year low.

Also, retail giant Wal-Mart Stores Inc., determined not to be outmaneuvered as it was last year when it didn't offer Black Friday specials, has set a quick pace with aggressive marketing and price cutting, forcing the hand of its competitors.

The raised expectations bode well for retailing, which typically racks up one-fifth of its yearly sales during late November and December, and for the U.S. economy, two-thirds of which is fueled by consumer spending.

"There's no question that things are better," said C. Britt Beemer, of America's Research Group, a Charleston company that tracks consumer spending habits.

"In just one month, consumer decisions on what they're going to spend have changed drastically."

When Beemer surveyed shoppers in early October, many said the most they would spend on a gift was $20 to $35. When he surveyed people again at the end of the month, they said they would spend $36 to $50.

"It's called gas prices," Beemer said about the sudden change. "When consumers see gas prices starting to approach under $2, it's like you just took a gorilla off their backs."

The national average price of regular unleaded gas was $2.189 yesterday, compared with $2.624 a month ago and $1.942 a year ago.

In Maryland, the average price was $2.170 yesterday, $2.626 a month ago and $1.938 a year ago.

"I just spent $2.09 on gas," Gina Clark, 40, said gleefully as she looked at children's clothes at Marshall's in Towson yesterday afternoon.

"You're apt to spend a little more when it cost you $30 to fill up the tank rather than $50."

Shirley Faulcon concurred as she picked out gloves for her brother at Marshall's: "I definitely wouldn't have spent as much as I will now that gas prices have come down. They're still not like where I'd like them to be, but they're manageable."

Analysts said that people are also in better spirits than they were a month or two ago after Hurricanes Katrina and Rita destroyed many communities near the Gulf Coast, most significantly New Orleans.

Many shoppers then weren't in the mood to spend on themselves and were donating from their disposable income to relief efforts.

"When we initially projected sales for the holiday season, it was right after Hurricane Katrina, right before Hurricane Rita and at a time when gas prices were high," said Ellen Tolley Davis, a spokeswoman for the National Retail Federation.

"There was concern that consumers wouldn't have the momentum to get through the holiday season unfazed."

Retailers also began heavy promotions earlier in the season, enticing consumers to spend.

Wal-Mart, which stumbled last year when it didn't offer its typical day-after-Thanksgiving sales, has led the pack. The world's largest retailer said this week that it will match the price of any of its competitors, among other offers.

"It's gotten me to go out a little earlier and spread my purchases rather than buy them all at one time at the end like I usually do," said Clark, the Marshall's shopper, who lives in Lutherville and is the director of the Muscular Dystrophy Association in Maryland.

Some regions of the country are struggling more than others, including the Gulf Coast and the Midwest, buffeted by the domestic auto industry's troubles.

Also, home-heating bills could eventually dampen consumer spending. This year's fall was mild, meaning most people won't get higher bills until later in the season, or at least after the holidays.

"People who heat with electricity and gas haven't really seen the effects of full-month heating bills yet," Hampel said.

Towanda Johnson, a management and program assistant for the federal government, said she hadn't planned to spend less because of gas and heating prices, but the lower gas prices are an extra incentive.

"I'm getting in the mood. I'm ready," she said while looking at shoes in Marshall's yesterday. "I can't wait to get out there Friday and start spending."

andrea.walker@baltsun.com

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