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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Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
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“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
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