Retailers in 2001 faced one of their most challenging years in recent memory as they tried to entice consumers, who were worried about their jobs, their debts and their nation.

Now retailers are wondering if they will fare any better in 2002.

“At this point nobody really knows what is going to happen next,” said Bob Benham, owner of the upscale Balliet’s store in Oklahoma City, Okla. “We’re going to plan that our sales will be up 2 percent, reduce our buying by 2 to 3 percent and pretty much stay in a holding pattern. We’re keeping our heads down for now, but we want to be ready when things bounce back, and they will bounce back.”

Nan Napier, president of El Paso, Tex., retailer Tres Mariposas, said, “I don’t know what will happen, but I guess I’m cautiously optimistic. We’re happy for what we’ve got, but we’re not going to be increasing our buys for now.”

Victoria Jackson, owner of Dallas shop Byzantine, said she expects sales to rebound by the middle of 2002. “That’s when I look for things to improve, but who knows?” She said the store’s sales were down slightly for fall and that she has cut back on orders by about 20 percent since Sept. 11.

“We’re playing it pretty conservative,” she said. “I know if I need something, I can pick it up later.”

Christine Bailey, vice president of merchandising at Little Rock, Ark., retailer Barbara Jean Ltd., said sales at the bridge and designer store increased in 2001 by 8 percent, a trend she expects to continue in 2002.

“We are planning a slight increase next year,” she said. “We are thinking positive and remaining optimistic.”

Bailey said lines such as St. John and Yansi Fugel have remained the store’s bread and butter, but the addition of Piazza Sempione, Celine and Michael Kors has helped boost sales. She also added Dolce & Gabbana and plans to introduce the D&G diffusion line for spring.

“The new lines got us more attention and brought in some new customers,” she said.

Walter Baker, owner and designer of contemporary collection View, said his business has recovered after a drop-off following the Sept. 11 terrorist attacks. The company is moving to a larger Seventh Avenue showroom in New York, which he said will allow the company to expand its offerings and attract new customers.

“People are finally out of the shock of 9-11,” he said. “They cut back for fall — our reorders fell right to the floor in October — but now business is coming back. We’re getting lots of orders for spring. People are shopping again, and I think in the next year our sales are going to be on fire.”

According to the U.S. government, the nation officially entered a recession in March 2001, and the tragic events of Sept. 11 sent many consumers back to home and hearth as they grappled with grief related to the attacks and fears for their own safety. Many retailers immediately cut back on orders and worked to keep inventories lean, but still faced markdowns in a highly promotional holiday season.

Apparel retailers also faced one of the warmest falls in years, a problem particularly for retailers in parts of the country that experience marked seasonal changes. November temperatures across the nation, for example, averaged 8.5 degrees above normal, according to the National Climatic Data Center. In Denver and Dallas, important markets for fur coat sales, fall temperatures were some 17 degrees warmer than the previous year.

For 2002, economists and retailers alike are optimistic. Barring any unforeseen events, economists expect a recovery will follow in the second half of the year. That recovery is based on retailers successfully purging their excess inventories, a projected 1.4 percent inflation rate for 2002 and the federal government’s aggressive monetary policy that has brought lower interest rates.

Already there have been some signs of a recovery. In the weeks following the Sept. 11 attacks, the U.S. stock market began to rebound and consumer confidence appeared to be rising. The University of Michigan’s closely watched consumer sentiment index edged up in December, rising from 81.8 in September to 85.8 in December. The index, based on telephone surveys of 250 Americans across the country, peaked at 112 in early 2000. Consumer spending underpins two-thirds of the economy.

One of the clouds on the horizon is unemployment. While consumers may want to be optimistic, many have been laid off and others still fear for their jobs. Unemployment is hovering at 5.4 percent — the highest in several years.

As for the regional economy, economists said the Southwest appears to be weathering the economic downturn better than other parts of the country. While Texas cities, including Dallas and Austin, have been hit by layoffs at high tech firms and Houston has seen major employer Enron file for bankruptcy, the region has also scored some economic victories. Fort Worth’s Lockheed Martin landed the $200 billion, 10-year contract to build the Joint Strike Fighter for the U.S. Department of Defense. In Oklahoma City, tax-funded projects — including a new arena and ballpark combined with downtown redevelopment initiatives (which includes the rebuilt federal office complex) — are boosting the economy.

“We’re starting to feel the effect of that growth rippling through the economy,” Benham said of the new construction.

Texas and the Southwest also enjoy higher consumer confidence according to Sherrie McAvoy, consumer business leader for the mid-America region of Deloitte & Touche.

“Generally the people here are more optimistic,” said McAvoy, who is based in Dallas. “That has a positive effect on how much they spend.”

She said retailers have generally done a good job managing inventories. “That bodes well for the future,” she said.

Lower fuel prices and falling interest rates are also putting more money in consumers’ pockets. While some consumers are using the savings from refinancing mortgages to pay off consumer debts or save for the future, McAvoy said some of that extra cash will find its way to stores, too.

Rod Teuber, a retail consultant based in Fort Worth, is hopeful that retail sales will rebound sometime in spring, but that recovery will depend on lower unemployment rates. “As companies work through their excess inventories and begin new projects, they will start hiring again,” he said. “If that doesn’t happen, then things will be tight. As long as we have the layoff scenarios, then people are going to be worried about their jobs and they won’t spend.”

Teuber said January and February, traditionally slow months for retailers, might be even slower than usual this year.

“People who didn’t cut back for Christmas will be cutting back now to pay for those purchases,” he said. “A customer who bought a special outfit for Valentine’s Day last year may only buy a sweater this year.”

The challenging retail environment means it’s more important than ever to go after the dollars consumers are spending. Teuber said specialty stores need to do whatever it takes to excite customers, using special events and promotions to boost traffic.

“You really have to coddle the consumer that much more,” he said. “Make two phone calls to them instead of the one you normally would make. Offer her special things she’ll enjoy.”

While 2001 has forced retailers to go back to the basics and fight for every sale, many are optimistic the dark retail skies are beginning to brighten.

“People love to shop,” said Balliet’s Benham. “Eventually they will be shopping again.”