No Humbug in Holiday Sales For Retailers' Biggest Season
GOODBYE traditional wool sweater. Hello Angora, mohair, and soft cotton knits.
If analysts are right, clothes for the BMW crowd will make a comeback this Christmas. Today's shoppers don't want the same old ``sensible'' thing. They're loosening their purse strings ever so slightly for the more chic, higher-quality merchandise.
Of course, power tools, computers, breadmakers, camcorders, and Mighty Morphin Power Rangers paraphernalia are also near the top of the wish list. The average American consumer plans to spend $883 on holiday gifts this shopping season, compared with $797 last year, according to a consumer survey by Kurt Salmon Associates Inc., a New York-based management consulting firm.
Overall, retailers won't find much to be hum-bugged about in this crucial season when about one-third of their sales are made. Analysts project a 6.5 percent increase in retail sales over last year. With fashion-conscious shoppers favoring, say, The Gap or J. C. Penney over Wal-Mart, stores could rake in $26 billion more than last year, says Jeffrey Humphreys, director of economic forecasting at the University of Georgia in Athens. Low unemployment, solid consumer confidence, and pent-up demand will drive higher spending, analysts say. The rise in interest rates will have little, if any, effect.
Yet apparel is the only gift category consumers plan to spend more on this year than last, according to a recent consumer survey by the International Mass Retail Association in Washington.
What's fueling the clothing comeback? For the past 18 months, consumers have curbed their clothing purchases - for financial or fashion reasons - and now they need to replace their threadbare duds.
Retailers already see more sales of accessories, which indicate that shoppers are breaking out of the ``basics'' mode, says John Ronzetti, vice president of information resources for the National Retail Federation in Washington.
``The cotton knits are big, [and] the mohairs and the softer Angoras are in this year,'' says Janet Mangano, retail analyst with brokerage house Burnham Securities Inc., in New York. ``So you don't have to get a traditional Shetland wool-type product.''
In particular, name-brand and designer clothing will benefit most this year from consumers' heightened emphasis on fashion, Mr. Humphreys says. ``Consumers are of the mind-set that they are once again willing and able to shop and gift-give,'' Mr. Ronzetti says.
But retailers shouldn't be fooled. Shoppers still want the biggest bang for their holiday buck. ``What you will see is a very practical, value-oriented consumer shopping out there,'' says Joseph Ronning, retail analyst at Brown Brothers Harriman & Co., a New York investment banking firm.
The push for apparel and better-quality goods will mean different winners this year, Humphreys says. ``Discounters are still riding a good wave, but the places where America goes for fashion are still department stores,'' which, he projects, will do better this season than last. Even small specialty stores, which, for several seasons, have seen their market share gobbled up by discounters and department stores, will also benefit from the trend for better fashion, he adds.
``We're optimistic about the holidays and believe that our sales performance should put us in the top tier of retailers,'' says John Costello, senior executive vice president of marketing at Sears Merchandise Group in Chicago.
Sears expects to move big-screen TVs and camcorders. Smaller appliances, such as bread makers, will also be popular, Mr. Costello says, as well as fine jewelry, sweaters, and terry cloth robes. Thanksgiving is also the biggest weekend for tire sales, he says, as people are anticipating the winter weather.
And weather will be key. Retail analysts find a double-major in economics and meteorology would be helpful right about now. The swing factor in the amount of clothes bought this weekend is the weather. Indeed, it's already affecting sales.
``The weather is working aggressively against us,'' Ronzetti says. ``Areas of the country that are typically into winter have only begun to think about it.'' As a result, fall apparel sales have been slow during the last three months, and retailers' inventories are a little fatter than normal, he says.
His prediction: ``If we have a 30-degree Thanksgiving, we're probably going to see massive movements in fall merchandise over the weekend, and probably not with as much markdown as if Thanksgiving is a 60-degree day.''
Of course, Americans' traditional just-in-time approach to holiday gift buying (elevated to a science by many men) could also force retailers to cut prices on merchandise before Christmas. ``What we have out there right now is a consumer who's waiting until the last minute to buy things,'' Mr. Ronning says. ``So as long as consumers say, `We will hold off until the last possible minute,' the likelihood of the retailers marking down their merchandise before Christmas increases.''
How will spending play out over the next few weeks? ``There's always a burst of spending after Thanksgiving,'' Ms. Mangano says. The next two weeks tend to be lackluster. The turning point, she says, is Dec. 15 or 16. ``That's when the momentum really starts to build.''