OUTLOOK FOR HOLIDAY SALES GETS MIXED REVIEWS FROM ANALYSTS

Byline: Jennifer Owens

WASHINGTON — Merchandisers may be facing “a little bit of a white-knuckle” Christmas, as one economist put it Wednesday, following the release of Commerce Department retail sales statistics reaffirming that September was sluggish at apparel and general merchandise store cash registers.
“I think the September results are serving as a warning that it’s going to be a difficult Christmas,” said Sandra Shaber, an economist with the WEFA Group in Philadelphia, “but I don’t think the concerns should be as bad as those numbers suggest.”
Indeed, economists had varying views as to how dim — or bright — a holiday season the September numbers portend.
According to the government figures, apparel and accessories store sales in September fell 0.7 percent against August, with sales down 0.7 percent against August, the worst month-to-month performance since March, when sales dropped 1 percent against February. However, September’s sales were up 4.1 percent against a year ago. In August, apparel and accessories store sales grew by a revised 1.2 percent over July and 6.2 percent over a year ago.
Similarly, sales among general merchandisers — including department stores, variety stores and discounters — slid 0.6 percent against August, although the month’s results were up 5 percent over a year ago. Department store sales alone — excluding leased departments — also fell, by 0.9 percent against August, but showed a 5.2 percent gain over a year ago.
According to revised Commerce figures, August sales at general merchandisers grew by 0.4 percent against July and 6.5 percent against a year ago, while August sales at department stores, excluding leased space, rose 0.4 percent over the previous month and 7.5 percent over a year ago.
Meanwhile, overall retail sales rose for the fourth consecutive month, by 0.3 percent over August and 5.2 percent over a year ago, due primarily to increased sales at furniture stores and automobile dealerships.
Rosalind Wells, chief economist for the National Retail Federation, said the sales decline at general merchandise and apparel specialty stores was due to unseasonably warm weather and lighter-than-normal consumer traffic, as shoppers stayed in front of their TV sets for coverage of the death and funeral of Princess Diana.
Wells said her fourth-quarter outlook is positive, with GAF sales — combining general merchandise, apparel specialty and furniture and home furnishing stores — rising by nearly 7 percent in the fourth quarter.
“All the factors that drive consumer spending point to solid increases during the all-important fourth quarter,” she said. “The economy continues to expand with employment growing, incomes rising, inflation low and consumer confidence high.”
But Carl Steidtmann, chief economist and director of research for Management Horizons, said September’s retail sales point to a much larger problem: increasing consumer debt.
“I think the real reason that sales are lousy has to do with the state of consumer finances, which aren’t all that great,” he said. Consumer credit debt is at record levels, with much of it falling most heavily on middle-income households, he said. Meanwhile, the lion’s share of the nation’s personal income gain has gone to higher-income households.
“I think this is about as clear as it gets,” Steidtmann said of September’s results. “It’s the depth of the drop combined with the problems consumers are having.”
Looking forward to holiday sales, Steidtmann said, retailers have relied too heavily on summer’s sales results. “Most retailers plan looking through the rearview mirror, and if you look back, it’s not too bad,” he said. “But I think this will be a mediocre Christmas, and many retailers are going to enter the season with a lot of inventory.”
On a more middle ground, Shaber of the WEFA Group said she agreed that consumer credit card debt was a factor in September’s sales, but said she thinks “retail sales in general will turn up again in the fourth quarter. I think department stores will do pretty well in general….But it’s going to be tough in the mass market, with a lot of price resistance.”

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