Retailers move early to foil Yule Grinch
It's a warm, soggy, early-November eve in Manhattan. Christmas is almost two months away. But as you stroll down 34th Street past R. H. Macy's department store, half the floodlit windows are already stuffed with red-rimmed crystal goblets, bowed boxes, and other Christmas trappings. The other windows are filled with Macy's ``elves'' building more displays.
In the gray streets of New York, the brillant hues are a welcome sight. But why does the pre-holiday hype appear so early? Statistics show retailers are not doing a bigger chunk of business before Christmas than in years past. Many stores make about one-third of all sales and half of all their profits in the last three months of the year. But those ratios haven't changed much over the years.
``Earlier and earlier promotions are a function of the shift in competition and tough times,'' says Fred Wintzer, a retail analyst at Alex. Brown & Sons, a Baltimore-based brokerage firm.
There are more stores per capita in the United States than there were a decade ago. And in the scramble to capture Yuletide dollars, merchants have shoved promotions closer to Halloween than Thanksgiving.
``The US has a population of about 235 million, but there are enough stores now to serve 500 million people,'' says James E. Williams, president of the National Retail Merchants Association.
The once-dominant Macy's-type department stores now must vie with throngs of specialty chains and boutiques -- from Toys `R' Us to Crazy Eddie's. Discounters have grown to become household names -- from K mart to the Price Club warehouses. And L. L. Bean of Freeport, Maine -- among many, many others -- is a testament to the growth of mail-order outfits.
The perception that Christmas has become more commercialized is due in part to the proliferation of stores and the accompanying marketing. Economic conditions accelerated the marketing hoopla last year after the economy stalled and merchants were stuck with a huge backlog of unsold items.
By November, ``sale'' signs were as plentiful as price tags. By December, retailers were anxiously surveying the shelves still stuffed with video games, Barbie dolls, and personal computers. Price slashing was rampant. As a result, sales figures were up in 1984, but thin profit margins reduced the retailers' take.
This year, sales have been so-so for general-merchandise retailers. But some stores saw a slight rise in October sales. And compared with last year, the numbers look good. Last week, Macy's reported third-quarter profits up 36 percent over last year. F. W. Woolworth & Co. posted a 46 percent quarter-to-quarter gain. Retailers are talking cautiously about a ``decent Christmas.''
``This year, our inventory is running a bit leaner,'' says Duncan Muir at J. C. Penney. ``While we expect a pretty good Christmas, we don't expect it to be Gangbusters.''
``Lean'' is the most often used description of inventory levels. Allen Sinai, chief economist at Shearson Lehman Brothers, notes that ``retailers will probably not have to cut prices [as much as last year] to move excess merchandise out this year.'' But Dr. Sinai hedges, saying consumers have become sophisticated bargain hunters, holding back for the sales and after-Christmas specials. So far, November sales are rather Grinch-like.
``Consumers are very much overextended by any historic measure,'' says Sandra Shaber, retail economist at Chase Econometrics, Bala-Cynwyd, Pa. ``They went crazy in August and September buying new cars.'' Consumer debt is at a record level, personal savings at a low, and income growth has slowed, she notes.
Although there will be ``a sharp slowdown as consumers regroup'' to pay off some loans, Dr. Shaber says she expects consumer spending to be about 4 percent higher than it was last year at this time. ``On a quarter-to-quarter basis over last year, Christmas won't look so bad, because last year Christmas wasn't so hot, either.''
Not a bad prognosis, considering there are fewer shopping days sandwiched between Thanksgiving and Christmas this year -- another reason retailers have unpacked the bulbs and tinsel early. In New York this month merchants are running television ads urging early shopping. Shorter checkout lines, a better selection of items, and more cheerful and attentive salesclerks are among the selling points.
From the store owner's perspective, it's sound business to spread sales over two months instead of one. Bad weather or an abrupt shift in the economic winds in December could seriously cut total annual earnings.
Of course, if you happen to be the President, there are other ways to extend the Christmas shopping season. In 1939, the economy was dragging. So Franklin D. Roosevelt shifted Thanksgiving, which traditionally marks the start of Christmas shopping. By moving it ahead one week, Roosevelt gave merchants extra shopping days. To prevent further presidential adjustments, Congress passed a law proclaiming the fourth Thursday in November as Thanksgiving.
The overall commercial transaction that accompanies Christmas each year is huge. In 1984, each American family spent an estimated $300 for Christmas gifts, according to a survey by the Conference Board, a business research organization based in New York. The US Chamber of Commerce puts the figure at about $500 for a family of four. Total sales nationwide thus amount to between $25 billion and $30 billion.
Merchants say they detect a trend toward buying the higher-quality gifts. With Halley's comet arcing across the southern skies, monogrammed telescopes and binoculars are expected to be in vogue this year. Sales of videocassette recorders and microwave ovens already have been extremely heavy this year, and that should carry into Christmas. Other leisure items expected to sell well: stereo TV sets, video cameras, digital disc players, flannel sheets, and fitness equipment.
And for those who thought ``pet rocks'' were suitable gifts, there's always a thin slice of the Big Apple.
Deeds are available on one-square-inch parcels of property in ``upper Manhattan (off Fifth Avenue)'' for $5 from the Big Apple Land Corporation, 41 East 42nd Street. Terms of the 10-year deed prohibit the owner from occupying, building, or receiving income or any financial benefits. To date, says president Scott Moger, ``The majority of requests have come in from Californians.'' CHART: Christmas-season sales appear modest . . . (Fourth-quarter outlook for the nation's top three retailers*) in billions Sears, Roebuck, K mart, J. C. Penney '84 '85 $11.37 11.48 6.88 7.15 4.43 4.47 . . . but earnings per share look stronger (tighter cost controls, lower inventories help*) Sears, Roebuck, K mart, J. C. Penney '84 '85 $1.54 1.70 1.58 2.20 2.89 2.93 * 1985 figures are estimates Source: Johnson Redbook Service, subsidiary of Prescott, Ball & Turben