Retailing in Florida is being slammed by weakness in several key areas. Tourism is down, the housing market is in tatters and unemployment is at its highest level in 17 years. “Florida might as well just write off 2009,” said Chris McCarty, an economist at the University of Florida’s Bureau of Economic and Business Research. “Things will not improve until statewide housing prices completely bottom out from the overbuilding of the last decade.”
The economic conditions in the fourth most populous state — home to more than 17 million people — are “the second worst in the nation,” after California, said Jeff Humphreys, economic forecaster at the University of Georgia’s Selig Center for Economic Growth. The state’s jobless rate reached 9.7 percent in March, up 4.3 percentage points since March 2008. Commercial and residential development and speculation peaked in 2006 and began slowing in fall 2007, as the costs of living, property taxes and insurance rose steeply.
Florida ranked fourth in the U.S. in home foreclosures during the first quarter, behind Nevada, Arizona and California, according to RealtyTrac. “Housing is to Florida as finance is to Wall Street,” said Cynthia Cohen, president of Strategic Mindshare, a Miami-based consulting firm.
The burst real estate bubble has been a key factor in curtailed consumer spending and now a decline in tourism — the state’s largest industry — is intensifying the blow to retailing, particularly in the luxury sector, Cohen said. The number of visitors to Florida in 2008 fell to 82.5 million, a decrease of 2.3 percent compared with 2007, and just 16.6 million people arrived between October and December, a 13.6 percent drop, according to Visit Florida, the state’s tourism marketing agency.
International tourists, who had been a major factor, are cutting back on Florida. “Florida has been through a recession before and tourism has suffered,” said McCarty of the University of Florida. “The problem with this particular recession is that it’s global, so international tourists aren’t bailing out the industry.” Bal Harbour Shops, a 100-store luxury mall north of Miami Beach that features Chanel, Gucci, Hermès and anchors Saks Fifth Avenue and Neiman Marcus, has felt the impact. After record highs in 2007 and double-digit increases in the first half of 2008, sales fell 21.7 percent in March, the latest figure available, compared with the year ago period. Current sales per square foot are $1,672, versus $2,161 in September, said Matthew Lazenby, general partner, adding that tourists account for as much as 70 percent of Bal Harbour’s clientele.
Six retailers slated for launch this year pulled out, he said, declining to identify them, but luxury brands such as Carolina Herrera, Diane von Furstenberg and Elie Tahari have opened in recent months.”Tumultuous global financial markets and ongoing problems accessing capital caused some previously done deals to become undone,” Lazenby said. South Beach’s Taj by Sabrina boutique, which sells lines such as Milly, Tibi and Etro, is among the many retailers that rely on tourism.
Co-owner Sabrina Crippa said traffic began to dip in September. Her clientele of Europeans and Americans that used to buy multiples at full price now limits spending to one current purchase and one or two sale items. She said sales are down but declined to give specific figures. To offset losses, Crippa is attending about 65 percent fewer trade shows, relying on Coterie and Project rather than shopping overseas.
South Florida isn’t the only part of the state suffering. Tourist-dependent Central Florida, with Orlando’s Disney World and other attractions, is also taking a hit. In the fourth quarter of 2008, Walt Disney Parks and Resorts reported a 4 percent decrease in revenue to $2.7 billion and a segment operating income decrease of 24 percent to $382 million compared with the same period a year ago. Attendance at Disney theme parks in the U.S. dropped 5 percent last year. The company is now offering deep discounts, gift cards and other special incentives to offset the losses.
Cindy Kaplus, co-owner of Sunset Strip, a high-end boutique near Orlando that carries contemporary brands such as William Rast and Ed Hardy, said sales were down 70 percent in the fourth quarter of 2008, and are 40 percent off this year. She and partner Suzi Vachon have moved the store from the tourist-heavy Dr. Phillips area to Winter Park, which relies more on local business. Most of the out-of-town shoppers who came into the Dr. Phillips location were “accidental tourists” who wandered in after dining at nearby restaurants, she said. The move has dropped her monthly rent to $1,900 from $8,000.
At Tuni’s, a specialty store in Winter Park that carries brands such as See by Chloé, Nanette Lepore and Rozae Nichols, sales were down 17 percent in 2008 and owner Paige Blackwelder saw a 22 percent decrease in the first quarter of 2009. Tuni’s recently teamed up with a nearby Ritz-Carlton hotel, which directs its guests to the boutique — and others — in exchange for added incentives for these referred shoppers, such as getting 20 percent off for showing a room key. Marketing manager for Tuni’s, Jess Cearly, thinks this and other creative partnerships are the way to weather the recession. “We’re trying to tap into another potential revenue stream and get more tourism in the area,” she said. This isn’t likely to happen anytime soon, said economist McCarty. “People won¹t be spending as much money on discretionary expenses like travel this year,” he said. “In fact, economic recovery in Florida won’t begin until the first quarter of 2010. The only thing retailers can do is try to keep decent cash flow and think very hard before expanding.”