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The Honolulu Advertiser
Posted on: Friday, November 23, 2001

Holiday spending expected to dip

By David Koenig
Associated Press Business Writer

DALLAS — The trunk of Diana Flores' car could be a roadmap to this year's holiday shopping season.

Kevin Marquette, center, portrays "Bobby, the Toy Soldier" at a toy store in Chicago's Michigan Avenue shopping district on Wednesday, Nov. 21.

Associated Press

Flores is a dedicated shopper who has been on the lookout for holiday gifts since July. But she doesn't throw her money around.

"I never pay full price for anything. You have to be selective, that's why I'm out every day," the Dallas woman said this week while rummaging through her trunk, which was stuffed with Wal-Mart shopping bags.

Discount stores such as Wal-Mart, Target and Costco are expected to be among the season's strongest retailers, while department stores are expected to compete for shoppers by slashing prices.

The National Retail Federation predicts holiday sales will rise 2.5 percent to 3 percent, to $206 billion, the smallest increase since 1990. But some analysts consider the trade group's forecast too rosy considering the weak economy and a reluctance by Americans to celebrate while the country is worried about terrorism and war.

Patrick Dunne, a marketing and retailing professor at Texas Tech University, predicts flat sales. He said by the first week in December, retailers will acknowledge their predicament and cut prices again and use all the other tricks of the trade.

"In Lubbock, we had Santa come to the mall before Thanksgiving," he said. "It's panic."

Retailers might find reason to panic in the recent unemployment reports. Last week, state officials reported that 27,800 Texans lost jobs in October, the worst month in more than a decade, and the jobless rate has risen by more than one-fourth in the past year.

Dunne predicted that upscale stores will hang on by offering better service to affluent customers, and so will discounters that offer lower prices. Department stores that appeal to the masses will be hit hardest as their customers cut spending and gravitate toward the discounters, he said.

"We know it's going to be a much more aggressive, competitive holiday season," said Stephanie Brown, a spokeswoman for J.C. Penney Co. "We knew that even before Sept. 11."

Penney pumped an extra $100 million into its advertising budget this year, with much of it earmarked for November and December.

Luxury retailer Neiman Marcus suffered "two horrible weeks" after Sept. 11, but traffic has rebounded to provide hope for a decent sales season, said spokesman Ken Downing.

Retailers have muted some of their more exuberant promotions in deference to the post-Sept. 11 mood.

Neiman Marcus canceled its Christmas catalog party, a lavish annual affair that highlights exotic and extravagant gifts, after the Sept. 11 terrorist attacks.

The toned-down promotions might match the public mood heading into the unofficial beginning of the holiday shopping season Friday.

Cheryl McCarter of Dallas said business is down at her husband's equipment company, so they will give gifts only to their children, ages 4 and 7.

"We don't need all that stuff anyway," McCarter said of gifts for adults. "You spend a lot of time shopping, and we'd rather spend time with the family."