Hope for the holidays

Despite a weak economy, drooping consumer confidence and backed-up ports, retailers try to be optimistic about the season they rely on for much of their profits.

By MARK ALBRIGHT, Times Staff Writer
© St. Petersburg Times
published October 20, 2002

Burdines is decked in holiday decorations. Sears, Roebuck & Co.'s Christmas trim-a-tree department is open. At Wal-Mart, rows of red silk poinsettias overlook a craft department with an aisle of fabric printed in Christmas themes.

The early jump on the holidays shows how retailers are pulling out the stops to entice consumers to shop early and often this year.

They face an uphill battle. For starters, there are only 26 shopping days after Thanksgiving this year, six fewer days and one fewer weekend than last year. Worse, experts say deteriorating consumer confidence, uncertainty over war and growing fears about job security and pay cuts are taking a toll.

"Consumers are getting more and more pessimistic," said Ken Rice, research director for Leo J. Shapiro and Associates, a Chicago firm that tracks consumer attitudes for several national chains. "For every consumer planning to spend more on Christmas, there are two planning to spend less. That's not normal."

Meanwhile, there has been temporary resolution of a labor lockout that shut down 29 West Coast ports jammed with freighters full of Asian-made Christmas goods. While President Bush opened the ports by ordering mediation two weeks ago, retailers are scrambling to get shipments to their stores in time for the holidays. Officials estimate it will take up to eight weeks to clear the backlog clogging the nation's cargo ports, trucks and trains. More than half of the apparel, footwear, electronics and toys imported to the United States comes through West Coast ports.

Many Florida merchants paid a premium to be sure goods arrive in time. But they acknowledge some stuff won't make it and remain wary the dockworker dispute will flare up again. "Things are moving out of the ports again, but we still don't know how this thing will play out," said Edie Clark, spokeswoman for the International Mass Retail Association, the trade group for discount chains such as Wal-Mart, Target and Kmart, the nation's biggest import sellers.

The National Retail Federation is sticking with its holiday forecast of a 4 percent gain in general merchandise, apparel and home furnishings sales. That would be milquetoast compared with a 5.6 percent sales gain run up last Christmas in the wake of Sept. 11.

"It's going to be a fairly weak Christmas," said Ira Kalish, chief economist for Retail Forward, a retail consultancy in Columbus, Ohio, that recently cut its forecast to a 3.3 percent holiday sales gain. "Housing and mortgage refinancing are the only things propelling the economy right now, and they are about to peter out."

"I think retailers will be lucky to get a 2 percent gain," said Britt Beemer, president of America's Research Group in Orlando. "This is shaping up as the worst holiday season since the Gulf War."

Hoping for a turnaround

Retailers had planned for a modest holiday all year. Inventories were reined in to protect profits. But with the Christmas holiday season so critical to retailers' annual performance, they can only cut back so far.

"I'm still optimistic about the holidays," said Monroe Milstein, chairman and chief executive of Burlington Coat Factory. "I have to be because I am a retailer. We're playing it aggressive because if we don't have the goods, we can't sell the goods."

Many retailers depend on the holidays for up to a quarter of their annual sales and half their annual profits in November and December. Jewelers, mail order catalogs and online merchants count on the holidays for about a third of their annual sales.

Most Tampa Bay area malls have been posting decreased sales this year thanks to the economy, fewer tourists and new competition from International Plaza in Tampa. They have been counting on the holidays to begin posting positive numbers again.

"We still think there's going to be a turnaround by December," said Todd Putman, vice president of marketing for Westfield America, which owns regional malls in Countryside, Brandon and Citrus Park in the Tampa Bay area and plans to boost its holiday promotion budget.

Another bellwether for the holidays is September. This year sales in September turned more anemic than many seers expected.

Overall, the typical consumer household plans to spend $649 on Christmas presents this holiday. But 89 percent intend to spend the same amount or less than they did last Christmas, according to a survey of 7,700 consumers released last week by BIGresearch.

"We will be seeing a very cautious consumer this year," said Phil Rist, vice president of strategy for BIGresearch. "It will be up to the retailer to give them a good reason to come out and shop."

"In essence, all retailers will be discounters this holiday season," said Tracy Mullin, president of the National Retail Federation.

Price slashing to move unsold merchandise may be more restrained, however. "Inventories are very lean this time, actually below last Christmas," said Carl Steidtmann, chief economist for Deloitte Research. "So retailers don't face as much pressure this time to discount deeper than promotional sale events they already planned."

The allure of the new, old

Retailers think some emerging trends will help. New fashion fads are getting traction. While no red-hot new toy has emerged, there are plenty of nominees.

At Toys "R" Us, the latest $19.99 version of Tickle Me Elmo does the chicken dance, a $79.99 wooden doll house comes furnished in Laura Ashley fabric, and a $14.99 Spider-Man Web Blaster Glove squirts a sticky substance. Some think Yu-Gi-Oh collectible cards will make kids forget Pokemon.

Men's tailored clothing sales are up 12 percent ahead of last year, says NPD Group. So retailers hope sale prices will prod more men to forsake casual wear at work. It's one reason JCPenney is heavily promoting a new type of wrinkle-free cotton dress shirt priced at $37.50. A sea of neckties is getting more prominent display in many stores.

Seventh Avenue is eager to bring back the 1970s among women too young to have experienced them. Earth tones such as brown, rust and barn red are selling briskly. So are hooded sweat shirts, macrame belts, Bohemian/peasant style blouses and twill pants.

Old Navy, which used The Brady Bunch to push rugby shirts in September, has revived the corny Green Acres TV show for ads promoting its baggy painter's pants. Adidas and K-Swiss are recycling their athletic shoe styles of the 1970s as "classics." "We're carrying Puma shoes and apparel for the first time since 1980," said Conrad Szymanski, president of Beall's Department Stores.

Department stores are trying new ways to compete with discount stores. At Sears and JCPenney, customers will find central checkout counters and shopping carts that double as baby strollers.

"Focus groups have told us that some people prefer the convenience of shopping the whole store and checking out once," said Carey Watson, Burdine's vice president of marketing.

Planning ahead for lockout

The West Coast port lockout came as no surprise to retailers. Most had been mapping contingency plans since May.

Many retailers expedited shipments to arrive before the lockout. Others jammed East Coast ports by diverting shipments that could fit through the Panama Canal. Others used pricey air freight to deliver items needed to make good on advertised deals scheduled for early in the season. Still, there are spot shortages.

"The lockout is over, but we're still not sure how quickly product flow will be restored," said Glenn Richter, chief financial officer of Sears.

"We've been worried about what the lockout would do the American economy as well as to our inventory shipments if it went beyond two weeks," said Tom Williams, a spokesman for Wal-Mart Stores Inc. "We're happy they re-opened the ports. But it's going to be a few weeks before things get back to normal, and, hopefully, shoppers will not notice the difference by Christmas."

Ships are being unloaded, however, with priority to perishable foods and goods destined for the military. There's also a shortage of chassis needed to drive the semitrailer-size containers to retailers' warehouses.

The large number of loaded containers tied up also created a shortage of them back in Asia where goods retailers will need to restock empty shelves the week before Christmas are waiting to be loaded.

Retailers are complaining about price gouging by shippers that will erode their profit margins. Normally containers sit waiting to be unloaded for up to a month. To get them emptied faster, some shippers are levying daily penalties on containers that sit at retail warehouses.

Air freight sends shipping costs through the roof. It costs Beall's 20 cents to ship a shirt from Asia to its Bradenton distribution center. Air freight inflates the cost to $1.50 a shirt. The company has been confronted by some shippers wanting as much as $3.

"Some shippers are trying to take advantage of the situation," Szymanski said.