After limping through a holiday gift-buying season expected to be the worst in decades, US stores made it to Christmas with little to celebrate.
For many merchants, the winter and beyond are likely to get even bleaker, because Americans are too worried about their jobs and the recession to do much shopping.
Over the past year, US shoppers have drastically changed their spending habits in ways not seen since the 1970s, switching to store brands and discounters like Wal-Mart. During the holiday shopping season, they cut back on their spending, took advantage of big discounts and bought practical gifts.
PHOTO: AFP
One of the big worries for stores is what to do with the mounds of items they still have to sell. If 75 percent off before Dec. 25 didn’t make people splurge, will even bigger deals afterward do the trick? Another problem is that shoppers shunned gift cards this season. That means they are less likely to return to the stores after the holiday.
“The new consumer mantra for this coming year is: ‘If I don’t need it, I won’t buy it,’” said Britt Beemer, chairman of America’s Research Group. “America is going from a consuming society to a planned-buying society. Everything is focused on saving more money.”
The retail industry could be looking at its biggest contraction in 35 years, said Burt Flickinger, managing director of consulting firm Strategic Resource Group. He estimates that 160,000 stores will have closed this year and predicts that an additional 200,000 will shutter next year. In March and April of next year, Flickinger expects 2,000 to 3,000 malls to shutter.
A number of stores struggled just to make it to Christmas.
Circuit City Stores filed for bankruptcy protection last month. It plans to keep operating, but KB Toys, which filed for bankruptcy protection earlier this month, has already begun to liquidate all of its stores and will shut down completely.
Finlay Fine Jewelry, which operates stores such as Bailey Banks Biddle, warned a week ago that it may not have enough cash to operate through the end of its fiscal year on Jan. 31, and may have to “significantly curtail” its business.
In Christmases past, stores could rely on a surge before or after the holiday to help save the season. But this year, it was virtually over before it began as stores had to slash prices on holiday goods as soon as they hit the shelves.
Stores had a good start, fueled by bargain buying, but sales soon flattened. For the last weekend before Christmas, total retail sales fell 5 percent from a year earlier as winter storms kept people home, research firm ShopperTrak RCT said.
Consumer spending fell for a fifth straight month last month, government data showed on Wednesday, the longest weak stretch in half a century, while incomes fell and layoffs mounted. The climate is expected to get worse before it gets better.
Economists have kept lowering their holiday predictions. Michael Niemira, chief economist at the International Council of Shopping Centers, now expects sales at established stores for last month and this month will fall 1.5 percent to 2 percent from the year before — making it the weakest holiday season since at least 1969 when the index began.
A full picture of the holiday season will not be known until Jan. 8, when major retailers report their sales figures.
Stores desperate to pull in shoppers started deeply discounting holiday goods starting last month, but that is expected to mean lower profits.
Ken Perkins, president of research company RetailMetrics LLC, expects overall store profits for the fourth quarter — which for most stores runs through the end of January — to drop nearly 19 percent from the same period a year ago. He expects profits to tumble about 10 percent in the first quarter.
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