It’s a holiday season of modest expectations for many retailers in the Southeast.
After charging out of the gate on Black Friday weekend with promotions, events and giveaways, merchants are hoping that cold weather and markdowns build sales.
In addition to coping with nationwide trends of high fuel prices, diminishing home values and tight credit, stores are getting fallout from a severe drought in Georgia that has wreaked havoc on agriculture and related businesses, and balmy temperatures that lasted deep into November, hurting fall sales and leaving retailers with an excess of inventory going into holiday.
“Savvy retailers were smart to capture the momentum that’s left in the third quarter with heavy discounts and more ad spending because it may be a weak finish,” said Jeff Humphreys, director of economic forecasting at the University of Georgia’s Terry College of Business, who predicted a 3 percent same-store sales increase for the Southeast. “With the economy at the tipping point of a recession that could start the first quarter of next year, consumer confidence is low.”
The impact of the housing market’s tumble varies. For example, Georgia, Tennessee and North Carolina, where prices and sales have been relatively stable in recent years, are faring better than the Florida market, where declines are among the highest in the nation.
“Florida real estate is in free-fall,” said Mark Vitner, senior economist for Wachovia, who said tourists, especially wealthy visitors from abroad, were keeping luxury markets afloat in South Florida.
For Florida, Vitner projects overall holiday sales gains of 2 percent, while projecting Atlanta’s sales gains at 5 percent. In the Carolinas and Tennessee, where cities like Raleigh and Nashville have more robust economies, he forecast 6 to 7 percent gains.
Two Atlanta bellwethers, the Lenox Square and Phipps Plaza malls, both owned by Indianapolis-based Simon Properties Group, appear to be holding their own.
“Retailers…are happy to be meeting expectations,” said Dewayne Herbert, area director of marketing for Lenox Square and Phipps Plaza. “Everybody’s aware of the bad news reports and are working to capitalize on sales early, with discounts, coupons and shopping passes.”
He projected overall holiday sales would be flat to slightly higher than last year.
This story first appeared in the December 11, 2007 issue of WWD. Subscribe Today.
Goody’s, based in Knoxville, Tenn., with 385 stores, mostly in the Southeast serving smaller markets with an average household income of $50,000, turned up the volume with more promotions.
“We’re not overly excited,” said Mary Kwon, president and chief merchandising officer. “We’re focusing on margin gains, looking at pricing in key categories every week.”
Kwon said Goody’s middle-income consumers spend first on kids, then women, then men, resulting in category performances ranking in that order.
“To compete with powerhouses like Target and Penney’s, we need better sourcing and product development,” Kwon said.
Focusing on exclusive product, Goody’s overall strategy is to grow private label from 30 to 50 percent, and look to private brands, such as Ashley Judd’s updated misses’ sportswear line, to offer unique product as well as analyze prices weekly.
The largest privately held department store chain, Belk, based in Charlotte, N.C., with 303 stores in 16 states, is “not in panic mode,” said Steve Pernotto, executive vice president, human resources. “Our biggest challenge is perception, as people read and hear all the negatives. But we’re hoping for a last-minute surge.”
Online retailers are as aggressive as brick-and-mortar stores, offering discounts, promotions and free shipping, returns and gift wrapping.
Jessica Dauler, Atlanta-based founder of JessicaShops.com, a Web site and blog that finds online bargains for consumers, said traffic is up 50 percent because of more incentives, coupons, and the increasing convenience the Internet offers consumers.
Specialty stores with a luxury niche, particularly those in midsize cities with healthy economies, were more bullish.
Gus Meyer, a 6,000-square-foot Birmingham, Ala., store, with another unit in Nashville, projects holiday gains of 10 to 12 percent, with growth coming in designer, high-end bridge and unique, novelty product across all categories.
“We’re having good luck with Valentino, Michael Kors, St. John, as well as other lines department stores don’t carry….We tailor our merchandise to our Southern customer,” said Herman Heinle, president.
The Cotton Mill, with three Nashville stores, is increasing special occasion 20 to 30 percent, and trading up, with more $800 to $2,000 dresses, from resources such as Badgley Mischka, for holiday events.
“We’re expecting 12 to 15 percent increases,” said owner Bob Nemer. “Nashville’s strong medical, insurance and university communities contribute to a strong economy.”
However, Camille Wright, owner of Kaleidoscope, a better women’s specialty store in Decatur, Ga., an Atlanta suburb, just wants to hold her own. Wright slashed her holiday budget 25 percent, cutting back on cashmere sweaters, leather jackets and holiday special occasion wear. She increased her reliance on denim and stocked more inexpensive jewelry and accessories.
“I’m not optimistic about holiday but just hoping for flat sales,” she said.