CHICAGO — Strong consumer confidence and retail expansion are plus signs for the Midwest economy.
In 1994, according to analysts, both high-end and discount stores fared well, while department stores slugged it out in increasingly competitive markets. Apparel was not always a pacesetter, however, but some say there could be a strengthening of the category in the coming year, even though the general economy might see slower growth.
Furthermore, analysts differ as to how strong the Midwest is in relation to the rest of the country. But there is a general sense that the region now is doing at least OK.
According to an October 1994 survey by the University of Michigan, Midwesterners are among the most confident people in the nation when it comes to their economic outlook.
Part of their optimism is credited to wage growth through overtime in the manufacturing base, said Diane Swonk, regional economist with First Chicago Bank.
“The Midwest is considered the hot retail market now,” said Swonk, noting the expansion of major specialty stores like Nordstrom, which opened two stores in the Chicago area, and discounters like Target, which added 27 Midwestern outlets in 1994. She cautioned, however, that increasing competition might clog growth in 1995 and that rising interest rates mean higher debt payments on houses and credit cards. Also mortgage refinancing, the source of much consumer spending, will slow as well, after helping to buoy Christmas sales. “My concern is: Can we afford to feed all these retailers off a slowly growing consumer pie?” she said.
More reserved in his assessment of current conditions was Carl Steidtmann, director of research at Columbus, Ohio-based retail consultancy Management Horizons. The Midwest, he said, “is not terribly exciting in terms of consumer spending, but it is stable and predictable.”
With a 1994 growth rate in retail sales, excluding automobiles, of about 6 percent, the Midwest matched the national average, said Steidtmann. He went on to say that the region is stronger than the coasts, though weaker than the Rocky Mountain states, the Southeast and Texas.
“One of the bright lights of 1995 should be apparel,” said Steidtmann, who noted stronger spending in men’s apparel as a leading indicator. “Prices have increased less than consumer prices as a whole, so apparel becomes a better value.”
He added that discounters “outperformed the rest of the industry” and that “specialty stores have been the real laggers.”
The exception was in high-end merchandising, which was stronger than other areas, said Sidney Doolittle of McMillan & Doolittle, a retail consultancy in Chicago.
Overall, Doolittle noted, electronics, home furnishings and autos are “booming.” In contrast, he said, “apparel shows no sign of life.”
“All we can do is hope that the clothes in the closet are getting tired,” he said. “You can only go so long postponing. Sooner or later you have to spend.” Later, he said, would be spring.
According to Larry Williams, president of the 500-member Chicago Apparel Center Tenants Association, manufacturers and retailers claimed they were pleased with sales volume in 1994.
While store traffic surged, retailers were discounting heavily, so results were mixed, said Williams.
Traffic at buyer markets in Chicago for 1994 was up 10 percent over the previous year, and Williams said bookings for temporary exhibit space for the markets for the first half of 1995 are 10 percent ahead of a year ago.
“We take that as a very good sign,” he said, noting that children’s wear, women’s sportswear, special occasion and special-sized merchandise performed well in the previous year.
Moderate stores were busy expanding in 1994 to pump up sales with no signs of stopping. “We’re cautiously optimistic about 1995,” said Don Oscarson, senior vice president of marketing at Kohl’s Corp., based in Menominee Falls, Wis. The company added 18 new stores to its Midwestern chain of moderately priced soft goods department stores last year.
“All the studies we’ve seen say the consumer’s number one interest is in value,” said Oscarson, who outlined plans for 20 new stores in 1995, which will bring Kohl’s store count up to 128. The company is “filling in markets” in the Midwest and “expanding into contiguous states” like Pennsylvania, he continued.
Expansion accounted for much of the corporation’s growth in 1994. As of early December, same-store sales were up 5.6 percent versus 17.3 percent growth for all stores.
The formula for growth through expansion worked on a smaller scale at Glik’s, a 45-store chain of moderate-price apparel in Missouri and Illinois and based in Granite City, Ill.
“Store-per-store sales are flat, and the only way you can keep ahead or even is with growth,” said Jeff Glik, president, whose companywide growth of 6.5 percent for 1994 was accounted for by seven new stores opened during the year.
Seven more stores are slated to open in 1995, said Glik, who added that spring merchandise looks better than it has in a while.
“Manufacturers for spring ’95 are doing a better job of differentiating junior merchandise from contemporary misses’ merchandise,” he said. “Spring-summer ’95 looks very promising. In the past, a lot of manufacturers took a middle-of-the-road approach to two different groups.”
Expansion wasn’t limited to the moderate market. On upscale Oak Street in Chicago, Joan Weinstein, owner of Ultimo, Sonia Rykiel and Giorgio Armani boutiques, added a Jil Sander shop to her stable.
“Even taking the Jil Sander business out of Ultimo, our sales were up,” said Weinstein, whose collective sales were up 20.7 percent for the first 11 months of the year over those in 1993.
In her 25 years on Oak Street, Weinstein says her business has constantly “been on the ascent,” and she expects 1995 to continue apace. As a measure of her confidence, she increased her open-to-buys for all stores by 10 percent for spring and anticipates a similar increase for fall merchandise.
She credited increasing Oak Street tenancy for its cachet. In addition to her four stores, Barneys New York, Gianni Versace and Nicole Miller can be found on Oak Street. “The stronger the street becomes, the better the business becomes,” said Weinstein.
Promotions and “behind the scenes” tours of Oak Street offered to conventioneers helped draw store traffic from feeder markets like Detroit, Minneapolis and Milwaukee in 1994.
According to Marilyn Miglin, president of the Oak Street Council, growth on Oak Street will continue into the new year with new tenants, including St. John Knits and Trabert and Hoeffer Jewels.
“It helps position us as a street of dreams,” she said, adding that the national mood favored high-end retailers.
“Opulence is back,” she said. “You can say it again. In the early Nineties there was pressure for austerity, but now people realize you strive for rewards and pleasures.”