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U.S. retailers face worst holiday in years
Published in The Saudi Gazette on 18 - 09 - 2008


ho, maybe not even ho-hum. Horrible?
The impending US holiday shopping season is expected to be a weak one, but the debate is coming down to whether it could go down as one of the worst on record, as US consumers show an increasing reluctance to spend.
In the past year, consumers have been battered by the housing market downturn, surging food and fuel costs, a credit crunch, and a weakening job market.
On Monday, Wall Street had its worst day since markets reopened after the Sept. 11 attacks in 2001, as Lehman Brothers Holdings Inc filed for bankruptcy and insurer American International Group Inc struggled for survival.
The uncertain environment has caused consumers to do what is most frightening to retailers – cut consumption.
Purchases of home decor, flashy jewelry, trendy handbags and nice-to-have clothing have gone out the window in favor of food, toiletries and hot electronics.
All of these trends point to a grim holiday period, which can account for 25 percent to 40 percent of a retailer's annual revenue.
“Retailers are essentially bracing for a disappointing holiday season,” said Sung Won Sohn, an economics professor at California State University and a vice chairman at teen retailer Forever 21.
Touting low prices or offering heavy promotions will be crucial to winning sales.
“That's just about the only way you are going to be able to move your merchandise,” he said. “Consumers are not going to walk in voluntarily to buy full-priced merchandise.”
Grim or grimmer?
While the Thanksgiving weekend, which marks the start of the holiday shopping rush, is more than two months away, estimates for holiday sales are already trickling in.
Deloitte forecast holiday retail sales will rise 2.5 percent to 3 percent during the November to January period, less than last year's 3.4 percent increase and potentially one of the smallest gains since a 2 percent rise in the holiday season of 1991, when the nation had recently emerged from a recession.
Telsey Advisory Group currently expects holiday sales, or sales in November and December, to be flat to up 2 percent.
“We think it's going to be a tough holiday, probably one of the toughest since 2002,” said Telsey analyst Joseph Feldman.
According to the National Retail Federation, 2002 holiday sales rose 1.3 percent – the smallest gain since the trade group began tracking such figures in 1992.
The NRF has not released its forecast for this holiday, but last year its estimate for growth of 4 percent was too rosy. As the housing market stumbled, consumers pulled back on spending, and sales rose 3 percent – the worst growth in five years.
Government data released on Friday showed consumers continue to put the brakes on spending. Sales at US retail stores fell for a second straight month, with sales of clothing and electronics, which typically see high demand for back-to-school, weaker in August than July.
“What struck me about the report was how widespread the decline was,” said Carl Steidtmann, chief economist with Deloitte Research. “It's home improvement centers, and it's electronics, and it's department stores – about every major category of retail.”
A mild positive
In an interview on Friday, Steidtmann said the employment picture is not a robust one, and he does not see a recovery in the housing market before Christmas.
“The one thing retailers have going for them is we have seen energy prices come down, and if that holds and continues, that's a mild positive,” he said. Sohn said there is little on the horizon to bolster consumer spending in the final months of the year.
“A glimmer of hope is that housing is beginning to stabilize and that probably will give some optimism and hope to the consumer,” Sohn said. “But I don't think that's going to be a help in this upcoming holiday shopping season.”
He expects retailers to roll out holiday promotions earlier this year, and shoppers to gravitate to low prices.
NRF spokeswoman Ellen Davis said price is going to be the driving factor behind shoppers' purchasing decisions, followed by unique merchandise they cannot find elsewhere.
Retailers may promote more gifts for sharing, like Nintendo Co Ltd's Wii video game console, that can be used by the entire family, Davis said.
But Britt Beemer, chairman of consumer behavior tracking firm America's Research Group, is worried that parents may simply decide to go without this holiday.
“What I'm looking at... is how many adults will forgo giving Christmas presents to each other in order to keep their gift-giving to their kids about the same.”
In a dour prediction, he said holiday sales could be down this year. He expects a rush of shopping for the Thanksgiving weekend as consumers seek bargain-basement prices, but he then expects a severe drop in customer traffic until the final days before Christmas. – Reuters __


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