Hard Times Sweep Stores As Retail Problems Mount
AS other retailers are wondering how they'll get by in these lean times, Sears, Roebuck & Co. is expanding. Bolstered by strong sales, Sears plans an ambitious $4 billion upgrade; 22 full-service stores will open or relocate in 1996.
Sears was a happy exception to the overall trend last year.
For the retail industry as a whole, 1995 turned out to be ''catastrophic,'' says Kurt Barnard, president of Barnard's Retail Consulting Group in Scotch Plains, N.J. ''General-merchandise and apparel chains really took it on the chin in December. Sales were terrible across the board. This was their first downturn during the Christmas holiday period not attributed to a recession.''
Sales by general-merchandise and apparel stores fell slightly in December, the Commerce Department reported Tuesday. Overall retail sales, including cars, rose a modest 0.3 percent, down from a 0.7 percent in November. For 1995 as a whole, sales rose 4.9 percent, the smallest annual gain since 1991. Even major discounters such as Wal-Mart and K mart were affected.
A sharp drop in consumer confidence was also reported Tuesday. Debt levels and economic uncertainty are high.
''There are too many stores and too little demand,'' says Catherine Rooney, a retail specialist at Pitcairn Trust Company in Jenkintown, Pa.
''1996, unfortunately, is going to be a mirror image of 1995 - except a little worse,'' Mr. Barnard says. He notes that already two major chains have filed for bankruptcy this year: Rickel Home Centers, in South Plainfield, N.J., and Barney's, a New York men's apparel chain. Last year saw three major bankruptcies: Caldor, Bradley's, and Jamesway.
The retailers showing market clout, he says, are ''upscale'' firms such as Tiffany and Gucci's.
''This is going to be a tough year for retailers,'' Ms. Rooney says. The trend toward restructuring that has characterized the retail industry in recent years will continue.
The flight of shoppers from stores that occurred this past December, ''was not a one time, or a one quarter phenomenon,'' she adds. Rooney expects that the first quarter of 1996, ending March 31, will also be a troubled period for many mass merchandisers. But some chains, she says, should do well. Talbots, based in Hingham, Mass., is opening new apparel stores. The Gap is experiencing sales growth, based partly on the rollout of its Old Navy discount apparel stores.
The hard times sweeping through retail aisles will have a number of adverse side effects, Rooney reckons, including additional job losses and some production cutbacks by manufacturers with too high inventories. Owners of strip malls may also face challenges, such as being unable to raise rents or having to find new tenants as established stores downsize or go bankrupt.
In its retail forecast for this year, Deloitte & Touche Consulting Group in Parsippany, N.J., says stores will not survive by price alone. Customers also expect good service and wide choice of merchandise. ''The retail sector will continue undergoing the present bifurcation, as the high end changes and the 'value' stores experience growth at the expense of the sagging middle-market chains,'' the forecast says.
''Consumers are turning to the lowest-priced products around, and making do with much less,'' says Janet Mangano, an independent retail analyst in Short Hills, N.J.
''For many American families, there is a focus on buying just the necessities,'' Ms. Mangano says. She says that explains why ''Sears has been a winner.'' In addition to remodeling stores, ''They have developed a reputation for quality, dependability, and good-pricing. They are also willing to extend credit. They are uniquely positioned to do well in this retail environment.''