Transit Strike Day Two: NYC Retailers Reeling As Shoppers Take a Walk

As anger and frustration mounts, along with sale losses, there was intense pressure for a settlement of the two-day New York City transit strike.

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NEW YORK — Anxiety among retailers here ratcheted higher during the second day of the New York City transit strike on Wednesday amid signs of the walkout’s worsening economic toll.

The novelty of using ingenuity and unconventional modes of transportation to get from point A to point B in subfreezing weather wore off quickly among the seven million riders who use the largest U.S. mass transit system every workday. The level of anger and frustration was rising palpably just days before Christmas and Hanukkah.

There was an air of urgency as evidenced by Saks Fifth Avenue’s decision to launch its post-Christmas sale on Wednesday, offering 40 percent off, earlier than previous years when it began on the day after Christmas.

Bloomingdale’s chairman and chief executive officer, Michael Gould, said the drop in business at the 59th Street flagship in Manhattan won’t get made up by Bloomingdale’s suburban stores. He characterized Tuesday as “a difficult day,” and said Wednesday was not as busy as normal.

Bloomingdale’s closed at 8:30 p.m. Tuesday, an hour and a half earlier than scheduled to accommodate sales associates making the arduous trek home.

The growing despair crossed from major department stores on the East Side and in Midtown to lower Manhattan, where even the street vendors of Canal Street weren’t doing much business on knockoffs.

“Retail is taking the lion’s share of the hit,” said Kathryn Wylde, president and ceo of the Partnership for New York City, a consortium of 200 top companies. She estimated that stores are losing $60 million per day in sales.

“Retail seems to be suffering even more today than yesterday based on a formal survey of our partners,” Wylde said Wednesday. “Because the commute is two or three times longer than usual, any discretionary time people had to shop is gone. For people on a budget, any discretionary money is uncertain because they’re spending so much more to get to work. It’s the worst possible scenario for the shopping season.”

The developments came as Roger Toussaint, the leader of Transport Workers Union Local 100, which called the strike at 3 a.m. Tuesday, said at a news conference that he met with a state mediator and his members might return to the negotiating table if the Metropolitan Transportation Authority took its pension contribution plan off the table.

This story first appeared in the December 22, 2005 issue of WWD.  Subscribe Today.

The 33,700-member union is facing a $1 million-a-day fine for violating a state law that prohibits strikes by public employees, and individual workers are to be docked two days pay for each day of the walkout. State Supreme Court Justice Theodore Jones ordered Toussaint to appear in court on Thursday. He could be sentenced to jail.

Mayor Michael Bloomberg and Gov. George Pataki reiterated that talks should not resume until transit employees return to work. Bloomberg said the strike was responsible for a 40 percent decline in business at restaurants, an 80 percent decrease in visitors at museums, and a 90 percent drop-off in customers at the Fulton Mall in Brooklyn.

Bloomberg said, “I never thought that putting someone in jail and making them a martyr would help.”

The economic ramifications of the first subway and bus strike in 25 years are far-reaching. The New York City Economic Development Corp. put the total loss at $440 million to $600 million daily. City Comptroller William C. Thompson Jr. said New York could lose about $1.6 billion during the first week of the strike, a figure that factors in decreased output from reduced workforces and productivity, tax losses, overtime losses and retail losses. For December, the city had projected collecting $466 million in retail sales tax, without the strike.

Craig R. Johnson, president of Customer Growth Partners, said for almost all of the leading chains and major publicly held retailers, the percentage of sales the New York City market represents is in the single digits with the exception of Saks, whose Fifth Avenue flagship accounts for more than 25 percent of the Saks Fifth Avenue division’s sales.

At the Saks flagship late Wednesday afternoon, the main floor appeared fairly busy with customers going through the scarves, accessories and handbags that were marked down 40 percent. The store was a sea of markdowns.

Store managers were privately meeting with salespeople and going over schedules and commuting options. One manager told a group of salespeople that instead of providing a shuttle, as some stores have been doing, “We’re giving employees money. Please tell your team.”

While the fine jewelry area and many of the second-floor designer boutiques, such as Piazza Sempione, Giorgio Armani, Calvin Klein Collection, Burberry, Max Mara, Ralph Lauren and Donna Karan were extremely quiet, there was more activity on the footwear floor.

“It could be a lot busier,” said Johnny Petriello, a salesman in the designer shoe salon. “We went 40 percent off today on shoes already on sale. But the transit strike has certainly hurt our business. We would have had much more business. I’ve been here four years and when they break 40 percent off, people mob up and you can’t find enough sales help. Now you have more salespeople than you do customers.”

In addition to Saks, Wall Street analysts and economists said the strike would have a concentrated impact on just a few of the publicly traded retailers, including Federated Department Stores Inc., which owns Macy’s and Bloomingdale’s.

Deborah Weinswig, equity analyst at Citigroup, said in a research note that the “strike will have a significant impact on Saks Inc.” and “a modest impact on Federated,” and added that she does not “anticipate an impact to retailers in the broader New York-metropolitan area.”

However, with only a few shopping days remaining before Christmas, each day the strike continues could have an increased effect, she added.

“It is a big number for the big Manhattan department stores, but for all those little coffee shops, restaurants and small retail people, it’s devastating to them,” said a top retail executive, who asked not to be identified.

Herald Square, the home of Macy’s flagship and one of the city’s busiest shopping districts, was a shadow of its usually bustling self on Wednesday. “You could see that the pedestrian flow was about 50 percent of what it normally would be the week before Christmas,” said Dan Pisark, director of retail services at the 34th Street Partnership. “There’s usually 6,000 to 7,000 people an hour passing here. It was easily half of that.”

A.G. Edwards retail analyst Bob Buchanan, in a research report Wednesday, said, “Worst-case scenario, assuming the subway strike could last through Christmas day, we do see exposure to December same-store sales. We believe Federated’s three large properties in Manhattan — Macy’s Herald Square, Bloomingdale’s at 59th Street and Lexington Avenue, and Lord & Taylor at 39th and Fifth Avenue — represent 5 percent to 6 percent of Federated’s total sales. In the worst-case scenario, we believe Federated’s comps could be hurt 1 percent to 2 percent in December.

“We assume Saks’ flagship does about $500 million in sales, representing 12 percent of the company total,” he added. “Saks’ December comps could be adversely impacted by 3 percent by the strike, assuming the worst-case scenario of the strike lasting through Christmas day. Build-A-Bear, which just opened a flagship at 46th Street and Fifth Avenue in Manhattan, could see its comps fall 1 percent due to the strike. Abercrombie & Fitch, which just opened a flagship in Midtown and also operates two other stores in Manhattan, would be hurt by less than 1 percent in December.”

The aisles throughout Macy’s main floor were relatively quiet. The watches and jewelry departments were buzzing the most, but the handbag, fragrance and beauty counters lacked the usual throngs of holiday shoppers.

Customers at Macy’s were mostly tourists and area workers. “We are absolutely shopping for the holidays and for gifts,” said Jaime Zoller, who works in advertising nearby. “It’s usually much busier in the stores around here so we’re taking advantage.”

Conn Lynam, who was visiting from Ireland, was thrilled to be in the midst of the strike excitement. “It’s grand,” he said. “We’re getting a bit of exercise and we are shopping a lot.” He said the younger members of his family walked downtown to Century 21 from their Midtown hotel.

Other stores along 34th Street were close to desolate. Banana Republic, H&M and Gap had few patrons, while stores like Express, Zara and Steve Madden were near empty, save for employees.

“We have sales associates that can’t get in,” said Express store manager Nancy Smith. “It’s still holiday [but there] isn’t a lot of traffic.”

“Our sales were down 35 percent [on Tuesday,]” said Bakers store manager Isnel Sanon. “We’re losing people from the Bronx. Those are our best customers.” Sanon said the most popular purchase of Tuesday and Wednesday was a knee-high suede and nylon boot with fur trim on a wedge sole, on sale for $79.99.

“Because it’s 34th Street, the business we get is tourists,” said Eugene Ferreira, manager of Shoemania, which sells athletic sneakers and work-boot styles. “There are no locals [around].” Ferreira said consumers have been buying comfortable sneakers and walking shoes, like those from Mephisto and Echo.

Fortunoff’s on Fifth Avenue and 54th Street made its sale plan on the first day of the strike, said Arlene Putterman, vice president of public relations. However, Putterman said Wednesday’s traffic appeared slower in the morning, though she expected it to build as the day progressed.

At Olive and Bette’s, business on the first day was down 9 percent in same-store sales and units per transaction declined, owner Stacey Pecor said. “The biggest problem is getting sales associates to their stores,” she added. The company, which has four locations in Manhattan, is reimbursing employees for travel expenses. Another issue has been getting merchandise to and from the stores, especially the Madison Avenue location, because the street is closed except to emergency vehicles.

The company operates a store on Madison Avenue and 53rd Street and another at Rockefeller Center. “It seems like all of uptown is quiet. Rockefeller Center had a good day on Tuesday, but again, not what it should be the week before Christmas. They couldn’t have picked a worse time for a strike.”

Standing in the cluttered Think Pink lingerie shop at Grand Central Terminal, Radka Dobrinksa, manager, said, “People are just not in the mood to shop. The strike is starting to get on people’s nerves.”

Indeed, nerves were beginning to fray and patience for inconveniences such as long lines at banks because of fewer tellers and longer-than-usual lines to purchase tickets for Metro North and the Long Island Rail Road was wearing thin. Some restaurants didn’t received food deliveries and had nothing to serve customers on Wednesday morning.

Modell’s Sporting Goods on Wednesday said sales would be down 60 percent, revising an estimate on Tuesday of 25 to 50 percent.

Many stores were forced to close early because employees were anxious to get home.

Banana Republic on West 34th Street originally planned to close at 11 p.m. on Wednesday, but the store revised that to 7 p.m., said Mike Feder, director of the 34th Street Partnership’s Savvy Stores program, who visited 10 retailers, including Bakers, Express, Lane Bryant, Dr. Jay’s, Ann Taylor Loft, Foot Locker and Diamonds & Dials.

“We found that every store has some modification in its operating hours because of the strike,” he said. “They are opening later, which is a function of employees coming to work late. Stores are closing from one hour to three hours earlier. They’re mainly doing it because there’s less traffic on the street. The national chains are closing early in deference to their employees.”

Looking ahead to New Year’s Eve, Feder said some stores have already decided they will stay open later to try to make up some lost ground if the strike is not over. “The smaller independents said they definitely would stay open later,” he said.

With contributions from David Moin, Sophia Chabbott, Arthur Zaczkiewicz and Lisa Lockwood

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