Retailers don't see happy holidays
Advertiser Staff and News Services
NEW YORK — U.S. retailers may be heading into their worst holiday season in more than a decade as job cuts and slumping stock markets have pushed consumer confidence to a nine-year low.
The feeling isn't necessarily shared by Hawai'i retailers, but some of the largest national retail chains have begun issuing bleak sales forecasts.
Best Buy Co., the largest U.S. electronics retailer, and BJ's Wholesale Club Inc., a warehouse chain that sells everything from food to appliances, are among those predicting smaller sales gains than last year, when the Sept. 11 attacks crushed hopes for the season. Macy's parent Federated Department Stores Inc. has forecast that sales may fall as much as 2 percent.
Sales growth is petering even at discount merchants, such as Wal-Mart Stores Inc., which drew customers throughout the recession that began in March 2001. A 10-day closure of West Coast ports last month added to the woes of retailers including Gap Inc. by delaying holiday shipments. Many investors say there's scant evidence large numbers of shoppers will spend lavishly on gifts.
"I don't recall it ever being this bad, with everyone feeling so pessimistic," said Art Bonnel, manager of U.S. Global Investors' $80 million Bonnel Growth Fund, which sold all its retail stocks including Wal-Mart in the past four months.
Mike Niemira, a Bank of Tokyo-Mitsubishi Ltd. economist who has tracked the retail industry since 1984, predicts sales at U.S. stores open at least a year will rise 2 percent to 3.75 percent during the November-December period, from a year ago.
Holiday sales last year rose 2.2 percent from the year before, the smallest gain since 1997, as demand declined because of the recession and the terrorist attacks. Sales gains at the low end of the bank's estimate, which Niemira said are most likely, would be the worst since 1990, when they increased 2 percent.
"Consumers are seeing little reason to go shopping," he said. "Cutting prices isn't helping."
To be sure, predicting retail sales is hardly an exact science. Last year, chains such as Best Buy slashed forecasts after Sept. 11, and their sales rose more than expected when the holiday came around. This year, a stock market rally and sustained mortgage refinancing fueled by historically low interest rates may spur some people to spend on gifts.
For now, economists see more gloom than boom. The Conference Board's index of consumer confidence fell in October to 79.4, a nine-year low, from 93.7 in September. It was the fifth straight decline.
While the S&P 500 has gained 8.5 percent last month, investors have lost more than $7 trillion in the bear market that began in March 2000, based on changes in the Wilshire 5000 Total Market Index, the broadest measure of U.S. stocks.
"At the end of the day, people are still nervous," said Maria Azari, who helps manage about $2 billion in assets at Cambiar Investors LLC, including shares of electronics retailer Circuit City Stores Inc. and clothing chain Limited Brands.
In Hawai'i, there appears to be a little less pessimism. Gary Hino, general manager of Hino Hairstyles & Wigs, said he's not expecting a downturn in holiday sales, and says his wife will probably spend the same amount of money shopping for gifts this year.
Gill Berger, general manager of Sears at Ala Moana Center, said he expects holiday business will equal or better the 3 percent to 4 percent sales growth projections of the Ohio-based research and consulting firm Retail Forward Inc. and the National Retail Federation.
"The people of Hawai'i are resilient, and that's why I am more optimistic about this Christmas season than (other retailers)."
The owner of Ala Moana, the state's largest mall, last week reported that September and October comparable store sales were up about 30 percent over last year, and that the center is on pace to match sales of two years ago.
"Business in Hawai'i is very, very good," said Bob Michaels, president of Ala Moana owner General Growth Properties Inc.
Queen Ka'ahumanu Center official Scott Crockford, however, said conditions of consumer confidence, possible war and stock market woes mean tough business for Maui's largest mall. "We'll be lucky if (sales are) flat," he said.
In the past two months, Federated has said same-store sales may fall in the holiday quarter, and Best Buy has forecast that sales will about equal last year's — a far cry from the chain's average 9 percent gain the past five years.
On Oct. 10, BJ's Wholesale cut second-half forecasts, predicting same-store sales will rise no more than 1 percent. The company had projected a gain of 3 percent in August. Women's clothier Talbots Inc. said the same day that a slowdown in sales after Labor Day may push profit as low as 48 cents a share from 53 cents a year earlier.
Year-over-year sales growth at Wal-Mart's discount stores slowed to 3.6 percent in September from 5 percent in July, falling below analysts' forecasts each month.
Before that, April was the only month since January 2001 that the world's largest retailer's sales fell short of forecasts. Lower prices on clothing, electronics and food had helped discount chains such as Wal-Mart and Target gain customers as consumer spending slowed.
Wal-Mart and Target said they expect October sales to slow, and Target last month cut revenue and profit forecasts for the "near term." While neither company has provided specific fourth-quarter forecasts, investors said they're concerned.
"If it's tough for Wal-Mart, it's probably tougher for everybody else," said Martin Bukoll of Northern Trust Corp., which holds Wal-Mart shares among its $320 billion in assets.
