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Retailers get the pre-holiday jitters

Retailers are looking forward to a holiday shopping season that should improve on last year’s disappointing results, but so far there is little for consumers to get excited about in malls and stores.
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Retailers are anxiously looking forward to a holiday shopping season that should improve on last year’s disappointing results, but so far there seems little for consumers to get excited about in the nation’s malls and stores.

“Stores are boring,” declared longtime retail analyst Kurt Barnard. “The sameness of the merchandise can bring you to tears. Walk into any mall today, and often the only way you can tell one store from another is by the name on the door — certainly not by what is inside.”

Nonetheless Barnard and other analysts say the economy is improving steadily and predict retailers will do much better than last year, when holiday sales rose only 2.2 percent, the worst showing in more than a decade and barely enough to keep up with inflation.

The National Retail Federation (NRF) projects sales of general merchandise — including apparel, electronics, books and music — will rise 5.7 percent in November and December over last year’s level, while Barnard is looking for more modest 4 percent growth.

On average, consumers plan to spend $637 this holiday season, about the same as last year, according to a survey released Thursday by NPD Group, a market research company based in Port Washington, N.Y.

Intentions vary widely by age and income level, with consumers aged 55-64 planning the most holiday-related spending, an average $755, compared with $366 for those aged 18 to 24, according to the survey of 2,400 people.

Marshal Cohen, chief industry analyst for NPD, agreed with Barnard’s assessment that retailers and makers of consumer products have failed to create much buzz this holiday season.

“In the past consumers were driven to stores early to find hot items and those that were hyped as especially difficult to find, which drove purchases of other products as well,” he said. “Lately we’ve seen an absence of retailer-led product crazes.”

Fashion fails to excite younger consumers, Cohen said, although certain categories are doing well, including blue jeans, pricey shoes and intimate apparel like camisoles worn as outerwear. “This is a polarized business,” he said. “The luxury market is doing well, and (so is) the low-end fashion market.”

Given the tough economic environment of the past several years, retailers and manufacturers have grown extremely cautious in bringing new products to the market for the holiday season, said Barnard. The toy category in particular has lacked excitement since 2001, when a flood of Harry Potter licensed products hit store shelves in time for the holidays. Last year’s Potter merchandise reprise was met largely with indifference, analysts said.

Of course nobody can rule out another must-have toy like Furby or Tickle-Me-Elmo emerging in the weeks before Christmas, and perhaps this will be a big year for digital music players, with Apple Computer providing a big push to its pricey iPod line. But it is worth noting that 31 percent of consumers who were surveyed in mid-September claimed they already had begun their holiday shopping. (What, you haven’t started yet?)

Clothing remains the most popular category for holiday shopping, with two-thirds of those surveyed planning to spend money on apparel, compared with 53 percent for toys and about 40 percent on things like books, movies and music. Only 12 percent plan to buy electronic gear for the holidays, although 17 percent said they ended up buying electronics last holiday season.

While retail sales slipped in September from the strong pace in July and August, the decline was due to a slowdown in auto sales. In the general merchandise categories considered relevant to the holiday season, sales advanced slightly from August to September and were up 6.9 percent over the September 2002 levels, according to the NRF. And the key apparel category was up 10 percent from year-earlier levels.

“We’re very much on track” for 5.7 percent growth in the holiday season, said Scott Krugman, a spokesman for the retail trade group.

The final two months of the year account for about 23 percent of the year’s $900 billion in general merchandise sales but can mean “life or death” to some retailers, said Oscar Gonzalez, an economist with John Hancock Financial Services.

Some specialty retailers actually lose money the rest of the year, generating all their profits in the Christmas season, but December also is critical for big department stores, jewelers, electronics retailers and discounters like Wal-Mart, Kmart and Target.

With the economy at last showing real signs of life, having just ended its best quarter in at least four years, some analysts say the Christmas season could exceed expectations especially if consumers see signs of improvement in the job market.

“I think it’s going to be very good,” said Scott Brown, chief economist at Raymond James. “The old rule of thumb is how the back-to-school season goes is how the holiday season goes. And the back-to-school season was very strong.”

Although nobody expects the job market to improve significantly before Christmas, weekly claims for new unemployment benefits have been edging lower, and the economy added jobs in September for the first time in eight months. If the numbers keep moving in the right direction, and the stock market holds its gains, consumers should go into the final weeks of the year with stronger confidence than in the past two years, when war and terrorism dampened spirits.