Retailigence

“Club of Knowledge Hunters”

For retailers, naughty or nice holiday season?

Posted by retailigence on January 5, 2009

As bills start piling up in consumers’ mailboxes, retailers are tallying receipts from one of the most difficult holiday shopping seasons in years and planning ahead to an uncertain new year. Early indications point to a decline in overall sales in November and December, retailers’ busiest time. Many of the nation’s biggest retailers are expected to report December sales on Thursday.

“It was the worst Christmas I’ve seen in 16 years,” said Jeff Hamilton, owner of Hamilton’s Pro Shop, a golf shop on Jefferson Davis Highway in Colonial Heights.He was one of three merchants the newspaper tracked during the holiday season to see how their strategies to bring in sales worked. The other stores were Moss House in Powhatan County and Saxon Shoes in western Henrico County.

Hamilton’s approach was to trust that his core customers would power his holiday sales. He said his pricing was already lower than competitors’, so there was no need for discounts.Midway through the shopping season he adjusted his tactic and bought an ad. Purchases did not increase, Hamilton said. Until a surge in sales the week before Christmas, receipts had been down about 75 percent.In all, he expects sales to be down about 70 percent this holiday from the 2007 season.Hamilton said he’s not sure what to expect for this year.

“I own everything here — the building, the equipment — and I keep my costs down, so I know I’ll be OK for a while,” he said. “I’m just going to hang on as long as I can.”Hamilton’s sales decline is significantly higher than what experts and analysts predicted for the industry as a whole.

. . .

At least one major retail industry association is predicting this to have been the worst shopping season in nearly 40 years. Same-store sales for this past holiday season could be down at least 1 percent compared with 2007, the International Council of Shopping Centers estimated. Sales at stores open at least a year are considered the best indicator of a retailer’s performance because they compare the results of the same stores.

A 1 percent decline doesn’t sound excessive when weighed against major stock index declines of more than 30 percent last year, but it would mark the worst retail season since 1970. And it could be worse for some merchants. Michael P. Niemira, chief economist and director of research for the shopping center group, predicted that large sectors of the retail industry will see double-digit drops. Holiday shopping makes up about 40 percent of retailers’ annual revenue, experts say.

The major reason for the drop in sales is that consumers are wary of spending money in the face of national economic hardships, analysts and experts say. Last week, the Conference Board’s index of consumer confidence fell to the lowest level since records began in 1967.

. . .

Entering the most recent holiday season, Saxon Shoes president Gary Weiner said he planned to increase advertising compared with the prior year. The day after Christmas, sales at the Short Pump Town Center store were up 25 percent compared with the same day last year, Weiner said. “We had no different savings. The same markdowns. The same everything” he said. Weiner said sales for the holiday season at his store should be close to 2007 levels, primarily on the strength of results from the final two weeks of December.

For the first three months of 2009, he expects sales to range from a 5 percent increase to a 10 percent decrease from the first quarter of 2007. Weiner believes President-elect Barack Obama will push for government stimulus checks in the spring that will get people shopping in April.

Saxon can survive the lean times because the company’s size allows it to be nimble, he said. “As a family-owned business, we’re able to watch over our overhead and then adjust our buying and expenses on the fly,” he said. Weiner did not say he planned to cut staff or employees’ work hours. “We have a large staff that has people who are able to take time off when business is slow and work more hours when we are busy,” he said. “They don’t need to work 30 hours.”

. . .

Rene Matthews, who bought a shop on U.S. 60 in Powhatan in June, said her first holiday season went well. Sales at Moss House, which carries household accessories to collectible Webkinz, were higher than she expected, by a single-digit percentage. She has not finalized sales figures. “It was definitely a surprise and it makes me feel better about the spring,” she said.

Despite advertising and holding open houses to lure customers, Matthews said keeping inexpensive items in the store was key, given this economy. “Customers have told me that they spent less this year, so I think that worked well for us,” she said. Because of that unexpected turn, she adjusted her ordering for 2009. “I am definitely not ordering anything frivolous or extravagant,” Matthews said. Instead she will stock merchandise that can be sold for between $7 and $40.

. . .

What will happen to the retail industry as a whole is less than clear. The same struggles that kept customers out of stores during the holidays are expected to continue this year. TNS Retail Forward, an Ohio-based retail think tank, predicts sales will grow 2 percent in 2009, down from the 10-year average of 5 percent growth. Through November last year, growth was 2.3 percent.

And even though the ink on the register receipts isn’t dry yet, analysts are saying retailers could begin closing stores as soon as this month, with some heading to bankruptcy court. “The overall economic outlook remains quite dismal for the first half of 2009, and only a modest recovery is expected in the second half,” said Lynn Franco, director of The Conference Board Consumer Research Center.

Sources :-Richmond Times-Dispatch

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