Monday, December 30, 2002
Some analysts say the uncertain economy and the prospect of war could slow retail sales until fall.
NEW YORK (AP) -- 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?
Some analysts predict spending will pick up early in the New Year, barring a war with Iraq or a major terrorist attack. And stores will be ready, having kept their own merchandise orders in check this season so there isn't much surplus to unload. Instead, they can focus on selling goods for spring.
"There's a silver lining. ... Stores will be able to move into the newness of spring much faster. The old will be out of their hair," said Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates.
But the uncertain economy and the prospect of war has others predicting business won't really pick up until fall.
"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 a gradual slow improvement until at least September.
Factors involved
The holiday season was hurt by a number of predictable factors -- a sluggish economic environment, a season that was six days shorter than a year ago due to the lateness of Thanksgiving, and the lack of any must-have items that could have helped drive more traffic to stores.
Still, 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 to grow, not just hold steady. And Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd., now predicts sales at stores opened at least one year, known as same-store sales, in November and December combined will be up just 1.5 percent, the weakest increase since the index began tracking the data in 1970.
Even the nation's discounters, including Wal-Mart Stores Inc., which usually fare well during difficult economic times, faltered. Wal-Mart now expects same-store sales in December to rise from 2 percent to 3 percent; it had expected growth of between 3 percent and 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.
"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."