Worst holiday in decades leaves retailers hanging
By Anne D'Innocenzio
Associated Press
NEW YORK — Given a holiday season that's shaping up to be the weakest in more than 30 years in terms of sales growth, the big question is, how long will consumers' penny pinching last?
Associated Press
Some analysts predict spending will pick up early in the year, barring a war with Iraq or major terrorist attack. And they believe stores will be ready, having kept their merchandise orders in check this season so there isn't much surplus to unload.
Shoppers roamed for last-minute gifts Dec. 24 at the Target store in Fresno, Calif. Some analysts predict spending will pick up early in the year, and that stores will be ready with fresh inventory. But some say the lowest sales growth in decades may signal a slower recovery.
"There's a silver lining. ... Stores will be able to move into the newness of spring much faster," said Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates.
But the uncertain economy and prospect of war has others predicting business won't pick up until fall. Not everyone is confident that stores won't be stuck with a lot of leftover stock.
"Customers are more inclined to save than to spend," said Kurt Barnard, president of Barnard's Retail Trend Report. He said many people are worried about their jobs, and he expects to see only gradual slow improvement until at least September.
The holiday season was hurt by some predictable factors: a sluggish economy, a season six days shorter than a year ago, and the lack of must-have items that could drive store traffic.
Yet it was worse than expected. Strong consumer spending had offered hope in a bleak economy, "but that notion has clearly subsided," said Richard Jaffe, an analyst at UBS Warburg Securities.
Retailers count on sales that grow, not just hold steady. And Michael P. Niemira, vice president of Bank of TokyoiMitsubishi Ltd., now predicts sales at stores open at least one year, or same-store sales, in November and December combined will be up 1.5 percent, the weakest increase since the index began tracking the data in 1970.
Even discounters, which usually fare well in hard times, faltered. Wal-Mart Inc. expects same-store sales in December to rise 2 to 3 percent; it had expected 3 to 5 percent.
"When Wal-Mart has a soft Christmas, then America has a problem, because consumers are obviously not excited about buying anything — even at the lowest prices," said C. Britt Beemer, chairman of America's Research Group.
Wal-Mart spokesman Tom Williams said consumers appeared to wait longer to buy holiday items, even wrapping paper and Christmas trees, which saw a surge in the third week of December.
On Main Street and in the malls, shoppers monitored every markdown.
"I'm just looking for the sales on seasonal things. ... Before Christmas, they had 40 percent off. Today I found cards at 80 percent off. I have a good job, but I don't know if I will tomorrow, so I'm trying to save money where I can," said Monique Davis on Thursday, at a Wal-Mart store in Sanford, Fla.
Some shoppers were getting a head start on next year's gifts.
"We've already gone to the car once," said Mary Beth Cox, who was browsing through half-priced sweaters at Dillard's department store at McCain Mall in North Little Rock, Ark. "If you get 50 percent off now, next year you'll be paying full price for the same thing."
Still, many analysts put more blame on the stores themselves, for pinching pennies and not creating enough excitement for shoppers.
The season featured several popular items, such as FurReal cat, a robotic fluffy feline, and Bratz dolls. But it lacked the fervor of past toy fads such as Tickle Me Elmo or Furby.
"Stores have lost their 'wow' factor," said Beemer. "Manufacturers and retailers have to work together and create something new. Spending will come back when consumers have something they want to buy."
