NEW YORK — For the 2002 holiday season, retailers are facing the unknown.

Business has become increasingly tricky to forecast and difficult to plan for, given this year’s mounting economic and political uncertainties, prospects of war against Iraq, declining consumer confidence and spikey sales patterns. In response, retailers are more cautious with inventories; less prone to take fashion risks; eager to build up safer home departments, and overall, often feel like they’re entering a tunnel and their headlights are dimming.

There are, however, one or two things retailers do feel certain about. Price promoting will snowball in the coming weeks, and holiday sales gains will be minimal at best. Estimates from store executives range from flat to 2 or 3 points above last year, with the selling hampered by the compressed shopping season and customers delaying purchases. There are six fewer days between Thanksgiving and Christmas Day this year, compared to 2001, including one less weekend.

Stores are learning to cope. "We used to figure on a good six weeks" of holiday selling, said Helene Fortunoff, president of Fortunoff Fine Jewelry and Silverware Inc. "You can’t anymore. We’re happy with a three-week period."

In addition, there will be some inventory shortages from the West Coast dock strike last month, although some companies, such as Limited Brands, had contingencies, flying in goods from the Far East at extra cost, while reducing the holiday risk.

According to a "retail executive opinion survey" issued last week by the National Retail Federation and the Bank of Tokyo-Mitsubishi Ltd., retailers are split on the potential impact of the West Coast port dispute. Roughly 39 percent of the 50 retailers surveyed, from mom-and-pop operations to big-box chains, thought it would create merchandise shortages, another 39 percent thought that it wouldn’t and 22 percent were unsure. (See related story on page 2.)

The survey also indicated that about two-thirds of the retailers expect holiday sales to be the same or stronger than 2001, but if there is a war with Iraq, only 10.6 percent expect sales to be the same or stronger. The NRF itself has an optimistic peacetime holiday sales projection of 4 percent ahead, and sees retailers promoting heavily to encourage early holiday shopping.Aside from their home departments, retailers are banking on accessories and shoes. Retailers see innovation in accessories, but very little elsewhere in fashion. Knits, corduroy jackets, jeans, velvet and velour items, daywear, casual shoes and a handful of new fragrances, including Chance, Polo Blue, Armani, J.Lo Glow and Vera Wang, are potentially bestsellers for the fourth quarter, based on recent trends. Ready-to-wear overall is expected to be soft.

The hottest holiday items may be the most unimaginative — gift cards and cash. Retailers say both are gaining in popularity, and will fuel another huge after-Christmas shopping period, when price cuts are deepest.

"Even if the weather is cold and the economy is improved, it will be a very aggressively promoted Christmas," said Hal Kahn, chairman and chief executive officer of Macy’s East. "A lot of retailers are using the fourth quarter to pull them out for the year, particularly those in more tenuous positions."

"There is a concern about how quickly your competition pulls the plug and runs promotions," said Ron Frasch, chairman and ceo of Bergdorf Goodman. "But if we do our job and stick to our knitting, hopefully that will offset a promotional environment."

Some retailers suggested that the real bloodletting will occur in the first quarter of 2003, when takeover and liquidation activity accelerates, as the still-overstored industry shakes out. Youth chains and regional store operations are the most vulnerable after this year’s weak showings, and companies such as Gap and Kmart are likely to prune locations. There’s been speculation about The Limited possibly selling off its Lerner New York division, which is marginally profitable. As far as the holiday season, Limited chairman Leslie Wexner believes it will be "sloppy."

Despite the mess that may be ahead, some retailers, including Macy’s and Bergdorf’s, cited an uptick in certain categories over the last few weeks, and some other positive trends.

For example, Kahn said Macy’s is distributing fewer coupons than a year ago, having eliminated them from one-day sales, and is concentrating on "newness, limited distributed merchandise, private label and value-oriented gifts." He added that jewelry and fragrances are strong, and shoes are okay." Repeating a familiar theme, Kahn said that due to casualization and the lack of newness in the apparel business, "more and more of our customers are gravitating to accessories, fragrances, activewear and portions of home.""The good thing is that Bergdorf Goodman is selling full-price goods and luxury product very well," added Frasch. "That would normally bode well over the next quarter, but I don’t know how to read the variables. We are all in the same boat."

"There are too many unknowns," said Michael Gould, Bloomingdale’s chairman and ceo. Business overall is tough, he acknowledged, though contemporary sportswear, cosmetics and jewelry "have been terrific…. The young men’s business is very good, and some gift businesses and tabletop are very good."

Gould said that Bloomingdale’s is also less promotional this year, and that with business difficult, it’s more important to concentrate on gaining market share, ratcheting up service and improving the store presentation.

"Nowadays, when you look around at stores — not just our stores — you see more of an assortment, rather than a key-item approach," said Michael Weiss, chief executive of Express. "We are as key-item oriented as in the past, but we don’t look that way. It’s disguised, with a more outfitty appearance, but you can’t look like you’re selling the uniform of the season."

According to Paul Raffin, executive vice president of Express: "Fashion with a strong point of view will do well. If you don’t offer that, you are going to find yourself playing the price-promotion game." The Express point of view is based on "ultrafeminine sweaters, romantic blouses, embellished crosses and other embellished semiprecious jewelry using natural materials, as well as novelty handbags," he said.

"It’s tough out there," said another retail ceo of a major chain. "The economy is really in a roller coaster, and when you have the strong housing market, and zero percent financing on autos, that’s taking money from apparel. But there is a glimmer of hope. We’re coming up against the warmest winter on record in New York. We’ll see some real cold weather coming in," sparking sales of cold-weather apparel and accessories. "Other than that, there’s really nothing on the horizon to look for a strong Christmas."

Retailers can always hope the weather will fend off a disastrous holiday period."The weather has turned and is going to favor retail throughout the holiday season," said Paul Walsh, vice president, client services, Plananalytics, which advises retailers about weather conditions and how to plan for them. "Particularly in November, there will be a significant increase in weather-driven demand for cold-weather apparel, primarily in the Eastern United States. It won’t necessarily be a cold, cold winter, but it will be cold enough, relative to last year, to change the way people will shop. In apparel, the weather-driven demand for the next two weeks will be huge, and will continue to be favorable through week three of December."

"There are really two things happening," said Fortunoff. "Shoppers are gravitating toward merchandise that is lighthearted and fun, and in medium prices. They could be beautiful stones, colorful beaded necklaces — things that are bold, make a statement and make you smile. They’ll pay a few hundred dollars for a bead necklace or a stone ring for $1,200, which takes the place of what would have been a more important piece. But you still get a lot for the money, and it goes with current peasant and romantic clothing styles."

Fortunoff said she planned for "a very conservative holiday," adding: "Our units seem to be higher in number, but prices are a little lower. We sharpened our pencil considerably, put more money into advertising, and more key items in the catalog. It will be a flattish Christmas, or very slightly up. We still see the demand for diamond-stud earrings or a diamond necklace, but at $20,000 instead of $40,000."

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