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Klinefelter Sees Modest Gains

NEW YORK — This year’s Christmas will be a "solid base hit" rather than the home run for which retailers might still be hoping.<br><br>This was the metaphor advanced by U.S. Bancorp Piper Jaffray senior research analyst Jeffrey...

NEW YORK — This year’s Christmas will be a “solid base hit” rather than the home run for which retailers might still be hoping.

This was the metaphor advanced by U.S. Bancorp Piper Jaffray senior research analyst Jeffrey Klinefelter, who projected fourth-quarter same-store sales of 3.2 percent led by a 3.4 percent uptick among mass merchants.

While apparel sales have been on a downward trend in the last few years — last year’s fourth-quarter sales declined 15.6 percent on a year-over-year basis, the biggest decline in 10 quarters — the analyst noted that some of that decrease could be attributed to sales being diverted to purchases of new electronics products. Absent any must-haves in electronics this year, Klinefelter concluded that apparel sales will return to positive territory in the current fourth quarter.

Reigniting teen spending on apparel may prove more difficult. “Teenagers are feeling the brunt of the economic downturn, as indicated by lower fashion spending levels,” Klinefelter commented, adding that parents are spending less on their teens’ clothes as well.

Results among that acquisitive but fickle group thus far this year have been down dramatically. This fall, teen spending on apparel, footwear and accessories was down 25 percent from this spring’s survey as well as on a year-over-year basis — to $1,156 this fall versus $1,542 this spring and $1,536 in fall 2001. Females spent 8 percent less than in the spring and 22 percent less year-over-year, while males, remarkably, spent 46 percent less than in the spring and 23 percent less than they did in fall 2001.

Klinefelter said the drops in spending are attributable to a smaller group of students holding afterschool jobs — 25 percent versus 47 percent in spring 2002 — and a decline by 16 percent in parents’ willingness to purchase their teens’ fashion items.

Abercrombie & Fitch, Gap Inc.’s Old Navy unit and Pacific Sunwear are expected to benefit from easier comparisons and improved unit volume.

Klinefelter felt the loss of shopping days this year might be worse for the bottom line than the one on top. “We believe the majority of the population shops with a budget and with a fixed number of people for which to buy,” he wrote. “In our opinion, the shorter shopping schedule has potentially more impact on margins than sales.”

Separately, Michael Baker, director of research of the International Council of Shopping Centers, said he didn’t expect the shorter holiday season to be especially detrimental. In his opinion, the holiday shopping season should be viewed over a wider November-December time period rather than as the days between Thanksgiving and Christmas.

Speaking Friday during a holiday outlook presentation hosted by the Salomon Smith Barney Retail Team, he noted that promotional activity could be heated coming down the stretch before Christmas.

“Consumers have the wherewithal to spend more if they’re motivated to do it,” he asserted. “The weather is also more cooperative this year for seasonal goods, especially apparel. Total disposable income is up 4 to 5 percent, so the cash is out there and not being spent. If the ability to spend is there, what would turn that into a willingness to spend?”