PACIFIC NORTHWEST FACING RETAIL UNCERTAINTY
Byline: Kristin Young
LOS ANGELES — “We’ve got it all up here,” exclaimed Jeri Rice, owner of the boutique bearing her name in the Four Seasons Hotel in Seattle.
She’s not referring to her store, or the majestic mountains and waterways of the Pacific Northwest. She’s discussing the extraordinary confluence of near economic and environmental disasters that has rocked the region lately. It’s got retailers and manufacturers on the edge, worried about recession.
The region has been hit with a dot-com shakeout leading to thousands of layoffs, a drought, and the threat of energy problems spreading from California. Last month, Boeing said it will move its headquarters out of Seattle and, before that, the World Trade Organization riots, Mardi Gras mayhem, and the Feb. 28 earthquake disrupted the region’s laid-back lifestyle.
“It’s a scary time for retail and for people in general but you just gotta ride that wave,” said Rice.
Despite the area’s problems, Rice and other retailers, as well as manufacturers and economists say business has slowed, but has not reached a serious downturn and could turn around next year. Most say they will proceed cautiously during the spring and summer months and are hopeful business picks up by the fall.
Dick Conway, an economist and publisher of the Puget Sound Economic Forecaster, predicted that the region will escape a recession. Although the area has been enduring a slowdown for five years due mostly to the shrinking aerospace sector and, more recently, the dot-com meltdown, the area is posting a 2 percent annual growth rate.
“We have a little bit more wiggle room than the national economy,” he said.
According to Conway’s quarterly forecast published in February, retail sales in the Puget Sound region are expected to total $44.3 billion this year, an increase of 3.6 percent over 2000, or roughly a third of the area’s total personal income at $125 billion. In 2002, the picture is brighter with retail sales expected to grow by 6 percent. Apparel and accessories sales are expected to pull in about $2 billion in sales, representing a healthy increase of 4 percent over 2000 and, indeed, better than the U.S. rate, he said.
“Apparel is not particularly sensitive to business cycles,” said Conway, compared to sales of automobiles, furniture and appliances. “Whenever there’s a slowdown in the economy and rising chance of recession, consumers tend to get more cautious. They certainly don’t stop buying, they just buy a little bit less than they bought last year.”
Demand for apparel goods remains high, said Roberta Pauer, regional economist for the Washington Employment Security Department, though it’s more difficult to assess retail sales in Oregon because the state has no retail sales tax.
“I would expect Portland to report quite soft retail sales roughly equal to or barely above where they were a year ago,” said Michael Parks, editor and publisher of Marple’s Business Newsletter, which has covered the economy of Pacific Northwest since 1949. “And it’s based on the Oregon economy growing at a very slow pace right now in the neighborhood of 1 to 1.5 percent.” Idaho’s economy barely shows up on the radar screen, he said.
At Jeri Rice, such labels as Blue Marine and Ralph Lauren are sold, with price points ranging from $200 to $6,800. But customers have lately been opting for lower-ticket items, such as shoes and accessories. Rice said she believes those habits won’t last and sales will pick up later in the season. “I think women hear from their husbands, ‘Don’t spend, the stock market,’ That’s good for a week or two. And then you’ve got to sneak out of the house.”
Butch Blum, owner of high-end specialty stores bearing his name in Seattle, said conditions are not as bad as he’d imagined. “We’re not setting the world on fire but business has been decent.”
Blum said sales during February were “not great” and March has been “OK.” He expects tepid sales to continue through the summer with business in fall picking up and continuing better into next year.
The staff at Butch Blum is making an aggressive push to lure customers. The store is sending out more bulk mailings, placing more cold calls, and becoming more visible in the community.
“We’re doing everything short of going out on the street with a cane to drum up some business,” said Blum.
John Rottle, president of the moderate Rottle’s Clothing & Shoes store in Auburn, Wash., said he’s most worried about higher energy bills. “The energy crisis is very present and it’s very real,” he said. “It’s too early to tell but summer could get hairy. The uncertainty alone is troubling.”
Jim Famalette, chief executive of the Fresno, Calif.-based Gottschalks, said the 37 Lamonts stores in the Pacific Northwest, bought by Gottschalks last year, are less robust than stores in California. However, he said it’s difficult to determine whether that’s due to the regional economy or Gottschalks’ newness to the area.
Eddie Bauer, Nordstrom and The Bon Marche declined to comment for the story.
Apparel manufacturing employment fell 9 percent during February in Washington compared with the same month a year ago, due mostly to shifting operations to cheaper labor locations.
Portland, Ore.-based swimwear maker Jantzen said that although the company has not experienced a cutback in orders from retailers, it has recently implemented cost-cutting measures such as paring back on business trips and energy consumption.
“Our hope is that this summer when things get more dicey up here because of the water levels in the dams, we won’t be faced with shortages,” said Brian Murphy, a spokesman.