Sunday, October 19, 2003

Retailers see happier holidays ahead



By Randy Tucker
The Cincinnati Enquirer

Buoyed by rising economic indicators that sparked a four-month hot streak of consumer spending, retail industry analysts predict the 2003 holiday shopping season will be the most successful for shopkeepers in four years.

Fueling the flames of retailer optimism are a rising stock market, low interest rates that set off a tsunami of home refinancing and tax rebates that put spendable money in consumers' pockets.

Still, the question remains: Will the fickle Cincinnati holiday shopper spend like a drunken Santa, or curl up soberly and sock away the extra cash?

The answer is vital for retailers, stung by two consecutive holiday slumps - the worst in 10 years - who depend on the Christmas spirit for up to one-fourth of their annual sales.

"I'm still a little gun-shy when it comes to major purchases," said Matthew Lowe of Blue Ash, who was "window shopping" for Christmas gifts last week at Kenwood Towne Centre. "I'd have to think twice about spending a lot of money on one gift. But I guess I'm a little more confident about the economy and my own financial situation. I'm not as reluctant to spend money."

"We go all out at Christmas," said Laura Healy, a mother of four who turned to admire a display of holiday stemware at TJ Maxx downtown. "We spare no expense on gifts, parties, what have you, regardless of what's going on. I haven't started shopping yet, but I'm already getting excited about it," she said.

That roar you just heard is the collective cheer offered up by Cincinnati-area retailers who see the sentiments of Lowe and Healy as evidence that better times are ahead. With the traditional start of the shopping season, Thanksgiving, still more than a month away, stores already have begun to court holiday shoppers with Christmas trees and festive holiday decorations.

Particularly for small businesses, a successful holiday season at the cash register is a must.

Miles Altman, owner of King Arthur's Court toy store in Oakley, said he had his doubts about the upcoming season, fearing a repeat of last year when the economic and political climate contributed to a decline in toy sales nationwide. But based on the traffic he's seen in his store lately, he now describes himself as "cautiously optimistic."

"Two months ago, we were pessimistic about the holidays," he said. "But our October has started out very strong. That's a positive change.''

Indeed, the National Retail Federation predicts that November and December non-auto sales will rise 5.7 percent over last year to $217.4 billion. That would more than double last season's sales growth rate and produce the best holiday showing since sales climbed 8.2 percent in 1999, according to the NRF, the nation's largest retail trade group.

"It seems clear that the economy is picking up momentum just in time for the holidays," said Rosalind Wells, chief economist for the NRF. "Retail sales gains for the 2003 holiday season will be far better than the meager increases retailers experienced a year ago."

Despite the current optimism, some of the conditions that stole Christmas for retailers last year - sales grew a meager 2.2 percent, the smallest increase since the retail federation began tracking the data in 1992 - continue to lurk in the background.

A weak job market, nominal gains in wages and salaries and a slowdown in home refinancing could curb spending, said Frank Badillo, senior economist for the Columbus-based market research firm Retail Forward Inc. Still, even Badillo's conservative prediction of 4 percent growth in this holiday season would nearly double last year's performance.

"The economy and retail sales are on the rebound, but the signs suggest that it will be an uneven rebound," Badillo said. "Until consumers benefit from a pickup in the job market, sustaining the rebound depends on a lot of one-time economic drivers such as the surge in mortgage refinancing and tax breaks,' he said.

For now, the nation's merchants are riding high on a positive sales trend that began with a pronounced jump in third-quarter results, spurred largely by strong back-to-school sales.

And consumers continued to reach for their wallets last month, based on figures from the U.S. Commerce Department that showed sales of general merchandise in September jumped 6.9 percent from the same period in 2002.

"The momentum apparent in the economy and in retail sales will lead to a very happy holiday for the nation's retailers," the NRF's Wells said.

A survey released Oct. 16 by the NPD Group, a Port Washington, N.Y.-based market research group, indicates that most Americans - 81 percent - plan to spend the same or more this year on holiday gifts. The survey indicates the average consumer will spend $637 for gifts this season with top-end earners ($75,000 or more) planning to spend $945.

Department stores, which have struggled over the past two seasons and dragged down overall holiday sales, also are anticipating improved holiday results.

Cincinnati-based Federated Department Stores, the nation's largest department store retailer, raised its expectations for the third quarter after an unexpected spike in September sales brightened the holiday outlook for the parent of Lazarus-Macy's and Bloomingdale's.

"We have certainly been encouraged by the upward (sales) trend for August and September,'' said Carol Sanger, a Federated spokeswoman.

For retail giants such as Federated and smaller sellers such as King Arthur's Court, the staying power of the consumer this holiday season won't be fully known until Dec. 26, but the early signs are a welcome encouragement.

E-mail rtucker@enquirer.com




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