WWD.com/business-news/financial/study-calif-retailers-face-tough-08-464270/
government-trade
government-trade

Study: Calif. Retailers Face Tough ’08

Retailers in this key market face a struggle until at least the end of 2008 as key industries falter, a new study said.

LOS ANGELES — Retailers in this key market face a struggle until at least the end of 2008 as key industries falter, a new study said.

This story first appeared in the February 25, 2008 issue of WWD.  Subscribe Today.

The weak housing market along with turmoil in the entertainment and financial industries will stifle growth statewide, according to the Los Angeles County Economic Development Corp.’s 2008-2009 Economic Forecast & Industry Outlook.

The survey predicted a decline in taxable retail sales.

“This is a tough time for retailers, and it will remain tough until the end of the year, when the Fed interest rate adjustment and the federal economic stimulus package kick in,” said Jack Kyser, chief economist for the LAEDC. “A lot of the big retailers have lost their nerve and are playing it safe with the type of inventory, but if they don’t have anything new people aren’t interested.”

Many landlords “have been raising the [retail] rents exponentially, and they’re driving leaseholders out of business,” Kyser said. “In the apparel sector, it’s the people who can fill small orders and make quick turns that will fare the best through this.”

The entertainment industry faces more potential unrest. The Screen Actors Guild contract expires June 30, and there is lingering fallout from the 14-week strike by the Writers Guild of America, which took a toll on retailing before it was settled last week.

The economic forecast said payroll employment would grow 0.5 percent this year and 1 percent in 2009. Employment inched up 0.7 percent in 2007.

The housing slump is expected to keep a lid on purchases of furniture, home appliances and building materials, the report said. Stagnant or lower sales would have a negative impact on local governments, which depend on retail sales tax revenue to help fund their budgets.

A few sectors are expected to add positions this year, including leisure, hospitality and professional services.