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Shopping Centers Today -> November 2002
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WAR MAY HURT HOLIDAY SALES
By Ian Ritter
The specifics of their predictions may differ, but analysts agree that this holiday season won’t give most retailers much to cheer about. Many say November and December sales will be the same as or only slightly better than last year’s, which were hurt by a sluggish economy and the aftermath of Sept. 11.
This year retailers face other problems, analysts note, including the increasing likelihood of a war with Iraq, an unsteady stock market and lack of consumer interest in new fashions.
Among those predicting a moderate sales increase is Michael P. Niemira, an analyst at Bank of Tokyo-Mitsubishi. He cautioned, however, that if the United States goes to war, sales could end up being as bleak as last year’s. Holiday chain-store sales could rise 3.8 percent this year from last year’s 2.1 percent, he said, though war could pull them down into the 2 percent range.
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“It’s not a very aggressive forecast,” Niemira said. “It’s a tough one to call, because we could easily flip into that war scenario any time here.” And there’s not much retailers can do about it, he added, because “[war is] almost out of the hands of the economic realm.”
At Niemira’s predicted rate of increase, and based on U.S. Commerce Department figures, total sales for November and December would be about $221 billion, he said.
The Washington, D.C.-based National Retail Federation projected a similar increase of 4 percent during the season for all retailers.
“If we go to war with Iraq, obviously, we would have to take another look at the industry indicators,” said NRF spokesman Scott Krugman. “There’s a lot of things right now that are really putting consumers in a funk, but that doesn’t mean people will cancel Christmas.” He noted that 4 percent is not “cataclysmic.”
A short war wouldn’t harm the economy, said Deloitte & Touche economist Diane Kutyla, but “if it drags on and we hear about casualties or we hear about [terrorist] threats, a number of things could go wrong here.” Deloitte & Touche expects a 6 percent increase in overall consumer spending over last year, but that’s taking into account the service industry and home buying, among other things, in addition to traditional retail.
One of the gloomiest projections comes from Frank Badillo, senior economist at Columbus, Ohio-based retail consulting firm Retail Forward. Badillo predicts an increase of 3 percent to 3.5 percent this year over last year’s 4 percent in general merchandise — including apparel, furniture, electronics and miscellaneous goods. In one respect, stores actually benefited after last year’s anthrax scares, he said, because people stopped using catalogs and other formats that rely on mail delivery.
“Since then, catalog shopping has bounced back, and it will probably do well, but that will also mean less traffic in stores,” Badillo said.
Another problem dogging sales is that retailers aren’t coming up with anything especially exciting to shoppers this year, Badillo noted. “There aren’t a lot of hot new fashions that are giving consumers reasons to go out and buy apparel.”
Once again, discount retailers, such as Wal-Mart and Target, could turn in the strongest performance of any retail category, Badillo said.
Meanwhile, analysts at New York City-based Jupiter Research predict that total online retail sales will rise from $11.2 billion last year to $13.1 billion this year, a 17 percent gain. That would be down, however, from 2001’s 32 percent increase. The reason, said Jupiter associate analyst Juliana Deeks, is that though more people are shopping online, they are spending less per purchase.
Bank of Tokyo-Mitsubishi’s Niemira said that online and catalog sales account for about 10 percent of the holiday season’s total retail sales.
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