Rosenblum’s, a family-owned men’s and women’s business with two stores in Jacksonville, Fla., has been operating for 111 years. After a record-breaking 2007 followed by a slide last year, owner Bob Rosenblum is hunkering down for a struggle.
His challenge is representative of the retail difficulties throughout the Southeast.
With sales off 12 percent in 2008, Rosenblum’s is eliminating lines that are sold in nearby department or outlet stores, including Hugo Boss, Tommy Bahama and Cole Haan, and replacing them with made-to-order custom men’s wear, and contemporary women’s lines such as Nanette Lapore, Trina Turk and Tory Burch. The retailer cut inventory by $500,000 last fall, and is ramping up customer service with more personal calls, and giveaways such as a $100 no-strings-attached gift certificate to its best customers.
“We’re not taking January shipments, just cleaning up inventory,” Rosenblum said. “We’re planning budgets 10 to 20 percent down, hoping for the best and planning for the worst.”
With Florida among the epicenters of the recession, the pain in the Southeast also is being felt from the banking center of Charlotte, N.C., to the once booming Atlanta metropolitan area.
“The region overall reflects the national average, in job losses, wealth destruction, housing and credit problems,” said Mark Vitner, senior economist with Wachovia.
Economic conditions in Florida, the fourth most populous state with 17 million people, are the most serious in the Southeast and “the second worst in the nation” after California, said Jeff Humphries, economic forecaster at the University of Georgia’s Selig Center for Economic Growth.
The state’s jobless rate reached 8.1 percent in December, the highest level since September 1992. The population had been rising by an average of 418,000 annually from 2002 to 2006, but little change is predicted in the next few years, according to the University of Florida’s bureau of economic business and research.
Commercial and residential development and speculation peaked in 2006 and began slowing in fall 2007, as the cost of living, property taxes and insurance skyrocketed. In 2008, new home construction fell 80 percent and home prices declined 30 percent. The bad news will continue through 2009, Humphries said.
The burst real estate bubble has been a key factor in curtailed consumer spending.
“Housing is to Florida as finance is to Wall Street,” said Cynthia Cohen, president of Strategic Mindshare, a Miami-based consulting firm.
International tourism had helped to buoy retail in vacation cities such as Miami and Orlando, but has tapered with the global financial crisis and a stronger dollar. Data from Visitflorida.org show a 3.2 percent decline in visitors for third quarter 2008, compared with a 1.2 percent increase for the same period in 2007.
“Tourism and retail sales are down from last year,” Cohen said. “Luxury is soft and nobody is buying full-price anything.”
At Bal Harbour Shops, a luxury center north of Miami Beach anchored by Saks Fifth Avenue and Neiman Marcus, sales dropped 22 percent in October, after September’s peak of $2,161 a square foot, for non-department stores, said Matthew Lazenby, general partner. The 500,000-square-foot center had 2008 sales of more than $500 million, compared with $480 million in 2007. But in the last few months of the year, some stores posted sales declines as steep as 30 percent.
“We were booming through July,” Lazenby said. “Even in September, 15 tenants had double-digit increases.” Lazenby said international tourism is off, and local customers are cautious.
Strategic Mindshare’s Cohen said some Florida cities, such as Jacksonville and Tampa, “with real companies and industries,” are not suffering as much as tourist-driven Miami, Orlando and Naples. Jacksonville is a transportation hub with deep-water ports, railroads and pulp and paper manufacturing. Tampa has aerospace, medical technology and banking firms.
Nose for Clothes, a Miami-based women’s specialty chain with six south Florida stores and two in Atlanta, said the economic malaise is unprecedented.
“The old challenges that seemed so daunting pale by comparison to the past six to 12 months,” said chief executive officer Joe Falowitz.
The downturn began in November 2007, worsened with the credit crunch and “reached a new low” as the financial crisis erupted in October and November, he said. An annual 12 percent sales drop for the year ending Oct. 31 was augmented by 22 percent to 31 percent declines in the last months.
Nose for Clothes streamlined business, slashed inventory 35 percent, cut five of 15 employees and renegotiated deals with landlords. The downturn that started early in Florida stores is now just as bad in Atlanta.
Like Miami, Atlanta’s rapid development over the past decade, including major mixed-use projects and retail, is pulling back. Atlanta never had a real estate bubble or much speculative buying, but foreclosures have spiked.
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