Retailers Looking At Grim shopping season ahead

Tina Menier is no Scrooge, but her spending plans this holiday season are the kind that will hit retailers like a stake of holly through the heart.

"We're not going to do Christmas this year, and I'm super-serious about that," said Menier, a saleswoman at a La Jolla women's apparel store. "I used to have the typical American life. Everything was going good. But after many years of living in San Diego, the paycheck just doesn't cut it anymore."

Even as many San Diego retailers begin rolling out holiday merchandise this month, industry experts are predicting a bleak shopping season as consumers grapple with housing and credit woes, high fuel and food costs, rising unemployment and a meltdown on Wall Street.

November and December sales among shopping mall retailers - which account for the vast majority of holiday sales - will rise a mere 1.8 percent to $455.5 billion, the slowest growth since 2002, according to a forecast released yesterday by the International Council of Shopping Centers.

Though retail forecasts by economists and industry analysts differ - some look narrowly at apparel and department stores sales while others track a grouping known as GAFO, which includes general merchandise, apparel, furniture and other retailers - all the numbers point to the same thing, experts agreed.

"No matter what statistic you use, we're looking at the weakest holiday shopping season since 2002," said Michael Niemira, chief economist for the shopping center council. "There is a financial crisis, an economic crisis and a consumer confidence crisis. They are all intertwined, and they will take time to correct. And that's not something that will happen in the next two months."

Historically, November and December account for about a quarter of annual retail sales, though the importance of those two months has slipped slightly - to 22 percent of sales in 2007 - as retailers bring out holiday merchandise earlier and extend sales into January.

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This year, retail analysts predict a short, intense shopping season because there are only 27 days between Thanksgiving Day and Christmas, instead of last year's 32-day run. Consumers can expect smaller inventory to choose from and fewer clerks to wait on them as retailers try to control costs and avoid deep discounting on unmoved merchandise.

The best-performing retail segments are expected to be the value and discount warehouse clubs and superstores. Big-ticket items such as flat-screen televisions and iPods will take a back seat this year to brand apparel, DVDs and other more modestly priced items, experts said.

"Consumers are feeling a lot of pain and pressure . . . It's a scary time, and when they are scared they back off from spending," said Richard Jaffe, a retail apparel analyst with investment bank Stifel Nicolaus. "I don't think people will walk away from the holiday, but they will shift from big-ticket to smaller-ticket purchases."

Retailers got a grim taste of what the holiday months could bring with the release last week of September retail sales figures. U.S. retail chain stores posted a 1 percent increase in same-store sales for the month, the softest September since 2001, according to the International Council of Shopping Centers.

Sales at furniture and home furnishing stores were down 9.2 percent year over year, while electronics and appliance store sales declined 2.1 percent. Apparel sales in September dipped 2 percent from the previous September.

"September retail numbers really scared a lot of people," said George Whalen, a retail analyst with Carlsbad's Retail Management Consultants. "All the department stores were down, and some down by double digits. Those miserable numbers are a bellwether of what consumers are thinking, and there are too many indicators that say it's not good."

This year, U.S. consumers said they plan to spend less on gifts for family members - $466 vs. $469 in 2007, according to a National Retail Federation survey. It's the first time in the survey's seven years that Americans indicated they will spend less on family.

Consumers predicted their average total spending for the holidays will rise only 1.9 percent, to $832.36, the smallest predicted increase since the survey began in 2002.

Spending is expected to be particularly weak among young adults, as 18-to 24-year-olds plan to spend $50 less on gifts this year from last year. Retail federation Vice President Ellen Davis called that "a huge drop, it's about an 11 percent drop" for that category.

"Young adults have been kind of a shining star of spending in the last few years," Davis said. "This is really the first economic downturn that they've experienced, so it understandably freaks them out a little bit."

The survey was conducted between Sept. 30 and Oct. 7, after the federal bailout but before the largest stock market drops. Davis said the federation may conduct another survey in November to see if consumer reactions have changed.

Meanwhile, marketing experts said retailers have few options other than moving holiday merchandise in sooner, discounting deeper and carefully controlling inventory to make it through the holiday season.

"There is nothing particularly creative about those strategies, but there is little anyone can do when the consumer is battening the hatches and saying they have to cut back across the board," said George Belch, a marketing professor at San Diego State University.

At Home Depot - a top retailer in Christmas trees, wreaths and ornaments - holiday merchandise began appearing in San Diego stores Sept. 22. Last year the merchandise didn't come out until early October.

Mike Rivera, regional merchandising manager for Home Depot, said the region's 22 Home Depot stores already held a power tool promotion for holiday buyers and reduced prices on more than 1,000 items. The company also doubled its selection of energy-efficient holiday lighting this year, mindful that consumers are struggling with energy and fuel costs.

"We are pricing aggressively to make sure we are giving customers the best value," Rivera said.

Yet even aggressive pricing may not tempt consumers such as Menier. The Clairemont resident said she is looking for a second job to supplement the 30 hours a week she works as a retail clerk. Her husband, who is battling cancer, was laid off from his construction job after the housing boom went bust.

The couple have already had "the talk" with their 15-year-old daughter, letting her know that Christmas isn't coming this year.

Meanwhile, the holiday displays and merchandise already on some stores'shelves only make things worse, Menier said.

"We are struggling, with a capital S," she said. "It makes me sick to see the Christmas stuff out - it's not even Halloween yet. It's just more pressure we don't need." source>>>

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