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Wednesday, July 30, 2014

Retailers hopeful for holiday season

BY ANDREA CHANG
Los Angeles Times

LOS ANGELES — As retailers head toward the all-important holiday season, they have reason to be optimistic: Months of solid sales are widely expected to carry through to the end of the year, when shoppers are most likely to open their wallets.

Positive holiday performance could have a far-reaching effect. With consumer spending accounting for about 70 percent of the nation's economic activity, robust sales could breathe life into what has been a sluggish year so far for the broader economy.

Many industry analysts are predicting a good — but not great — holiday season.

The chief economist for the International Council of Shopping Centers, a major retail trade group, estimates that sales will rise 3.5 percent for November and December combined. Last year, sales during the same period beat expectations, rising 4.4 percent in what industry analysts called the best holiday results since 2006.

"It's a time when we do the greatest amount of our business, but it is also a season that defines retailers," said Jim Sluzewski, a spokesman at Macy's Inc., which last year saw 28 percent of its sales in the last two months of the year.

After the recession-plagued 2008 holiday season, the worst in more than four decades, retailers say they've become much more savvy about confronting economic challenges. They're not ordering too much inventory, and they're making sure that prices are budget-friendly.

"We are well prepared," Sluzewski said. "Our business is very flexible and we have a lot of ways to adjust our business no matter what happens."

Retailers, which ring up as much 40 percent of their annual sales during the last two months of the year, also are relying on a tried-and-true rule: Consumers love to splurge when the holidays roll around.

The start of holiday shopping comes amid skittishness over the volatile stock market, stubbornly high unemployment and tight credit that has constrained business growth. Strong holiday sales could provide much-needed momentum, said Michael Dart, a retail strategist at consulting firm Kurt Salmon.

"If we have a solid holiday season and there's a sense that the consumer is resilient... I think you get more bullish on hiring and it could start to move the employment rate," he said. "It could ease a lot of the anxiety that permeates every business and permeates the consumer psyche right now."

Retail analysts say the key segment to watch will be middle-income consumers. Wealthy Americans have spent freely on luxuries such as designer handbags, jewelry and watches, and lower-income shoppers seeking bargains have led to steady sales increases at discount chains, dollar stores and warehouse clubs.

Analysts say the back-to-school selling season, which often provides a hint of how the holidays will fare, has so far produced solid results. Despite stock market turmoil and Hurricane Irene, sales at major chain stores rose 4.4 percent year over year in August, the key month of the period, according to Thomson Reuters' tally of 23 retailers.

"We've been seeing consistent spending occurring even in discretionary sectors," said Michael McNamara, vice president of research and analysis at data service MasterCard Advisors SpendingPulse.

"This is just a consistent thing that has not correlated with the deterioration in consumer confidence," McNamara added. "It's been an interesting phenomenon in 2011."

Retailers are still keeping their biggest plans under wraps, but they have been busy preparing for the holidays all year: ordering merchandise, designing festive window displays and special holiday catalogs, and planning Black Friday promotions.

"Target begins preparing for the holiday season right after Christmas," said Cary Strouse, senior vice president of stores for Target Corp. The company recently announced four exclusive designer partnerships that will be in stores in time for the holidays, including a fashion line with Gwen Stefani.

Wal-Mart Stores Inc., the nation's largest retailer, will be adding to its holiday selection this year, including stocking more Christmas villages and outdoor lawn decor. The company said its focus would be on offering the lowest prices to its shoppers.

"We know our customers are feeling budget strains, and we are committed to helping ease that strain," said Tara Raddohl, a Wal-Mart spokeswoman.

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