PresidentObama and Capitol Hill might have until the end of the year to steer thecountry away from a slate of automatic tax increases and spendingcuts,but Black Friday is just around the corner.
Stores arefinalizing holiday plans and already promoting their doorbuster salesfor the key post-Thanksgiving rush (and, in some cases, Black Thursdayopenings). Now they have to contend with a seemingly endless stream ofnegative headlines about the country’s shaky finances and sharp declineson Wall Street.
TheS&P 500 Retailing Industry Group fell 1.2 percent, or 7.69 points,to 634.90 Wednesday as the Dow Jones Industrial Average dropped 1.5percent, or 185.23 points, to 12,570.95. That leaves the market downnearly 675 points since the election. The decliners included some offashion’s strongest names, such as Tumi Holdings Inc., down 7.2 percentto $19.99; Michael Kors Holdings Ltd., 5.7 percent to $48.11, andLululemon Athletica Inc., 5.6 percent to $65.92.
As America’sfiscal deadline approaches, Europe also continues to struggle throughthe fallout of its own cutbacks. Tens of thousands of workers in theEuropean Union held a series of strikes Wednesday to protest austeritymeasures and widespread unemployment. Spain and Portugal saw the highestturnouts with schools, universities, public transport and air traveldisrupted.
President Obama staked out his fiscal cliff positionat his first press conference since the election and called for anagreement to not raise taxes on 98 percent of Americans and 97 percentof small businesses.
“If we get that in place, we are actuallyremoving half of the fiscal cliff,” he said. “Half of the danger to oureconomy is removed by that single step.”
Alternatively, Republicans have been focusing on eliminating tax loopholes and capping deductions.
Obamalater pressed his case in a closed-door meeting with business leaders,including Mike Duke, president and chief executive officer of Wal-MartStores Inc., and Robert McDonald, president and ceo of Procter &Gamble Co. After the meeting, Duke said Wal-Mart’s customers are thecenter of the fiscal cliff debate.
“They are middle-classAmericans and those aspiring to join the middle class,” Duke said. “Ourcustomers are working hard to adapt to the ‘new normal,’ but theirconfidence is still very fragile. They are shopping for Christmas nowand they don’t need uncertainty over a tax increase.”
The fiscal cliff could also cause shoppers at the other end of the price spectrum to put away their wallets.
“It’ssomething we expect is going to have a little bit more of an impact onthe higher end of the market rather than the lower end,” said FrankBadillo, senior economist at Kantar Retail.
In addition tohaving more of their wealth tied up in the stock market, Badillo saidhigher-end consumers have been hurt by weakness in the job market forskilled professionals. “This is the other shoe falling now with thestock market falling off,” the economist said.
The fiscal cliff could hardly come at a worse time for retailers, which are still picking themselves up after Hurricane Sandy.
“Asthe holiday season is under way, considerable momentum has been lostand the impact of the aftermath of Hurricane Sandy on the holidayshopping season could be sizable, in addition to the negative impact onconsumer confidence due to the political and media attention to the‘fiscal cliff,’” said Chris G. Christopher Jr., senior principaleconomist at IHS Global Insight.
Christopher said IHS hasadjusted its holiday forecast downward, and is now predicting thatretail sales will increase less than 4 percent compared with last year.
“It is obvious that Hurricane Sandy has thrown retail sales off balance,” he said.
Theretail sector began to feel the impact of Sandy in October sales.Seasonally adjusted apparel and specialty store sales fell 0.1 percentto $18.8 billion in October versus September, as department store salesfell 0.3 percent to $14 billion, according to the Commerce Department.Overall retail sales fell 0.3 percent in October, worse than the 0.1percent dip economists projected.
Kevin Regan, senior managing director at FTI Consulting, said the upcoming holiday season would be “OK.”
“Obviously,there is a community that was harder hit than most and they may spendmore on home and car repairs,” Regan said. “But there is a much largercommunity and I think they still view the holidays as positive asevidenced by the consumer confidence [index].”
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EXCLUSIVE: Huda Kattan just became the first beauty influencer to land a major beauty deal. Kattan's business, @hudabeauty, has received a minority investment from private equity firm TSG Consumer Partners. The brand, which industry sources say is on track to do $200 million in retail sales for 2017, will receive support on product, retail and geographic expansion through the deal. Get all the details on the deal and read @_a_collins' interview with Kattan on WWD.com. Link in bio. (📷: @jgreenery) #wwdbeauty #wwdnews
Peruvian model @juanaburga_official – who is known for walking the runways of @rodarte, @viviennewestwood and @torybuch – is making the move to the big screen with drama “Los Últimos.” The film premiered in Argentina in November and arrives in the U.S. and Europe in 2018. On making the switch from modeling to acting, Burga told WWD: “It’s a completely different thing – a lot of people think it’s similar or try to connect things, especially like getting used to the camera or being looked at all the time or playing these different characrers, but film is a completely different story.” #wwdeye (📷: @jgreenery)
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