Santas and carolers still are heading to local malls this year, but retailers are singing a different jingle about the upcoming holiday season.
Instead of being optimistic about higher sales,as in years past,their voices are thick with apprehension this time around.
“We don’t have a good pulse on what to expect at this point,” said Todd Hiepler, general manager of MainPlace/Santa Ana. “I wish I had a crystal ball.”
Last year, Orange County retailers posted a 2% to 3% gain in holiday sales vs. 1999, according to Tony Cherbak, a retail analyst in the consumer products group at Deloitte & Touche LLP’s Costa Mesa office.
But that was down from prior years, when the hot economy drove yearly sales gains along the lines of 5% to 8%. This year, Cherbak predicts, retailers will be lucky to come in flat compared with last year.
2000’s slower holiday sales growth was the first glimmer of a retail downturn that has worsened this year and turned sharply since the Sept. 11 terrorist attacks.
“The retail industry as a whole is looking at (the holiday season) with a certain amount of question,” said Debra Gunn Downing, executive director of marketing at South Coast Plaza in Costa Mesa.
Last week’s Consumer Confidence Index report didn’t bode well. The index plunged to its lowest level since 1994. Shoppers have became more “conservative and reined in the purse strings,” according to Cherbak.
“I don’t see anything in the short term that’s going to change that,” he said.
Frank Kaufman, a partner at accounting firm Moss Adams LLP’s Irvine office, predicted that “(Retail) is going to be down over last year. Some of the (apparel retailers) that we deal with are slightly better than the trend but, even so, nobody’s doing very well.”
Store operators already are feeling the pinch. Anaheim-based Pacific Sunwear of California Inc. reported a 7.1% drop in same-store sales for the five weeks ended Oct. 7. The company also warned it expects to miss analysts’ estimates for the third and fourth quarters. Pacific Sunwear is set to report third-quarter results on Nov. 12.
Foothill Ranch-based women’s retailer Wet Seal Inc. has fared better so far, though its growth is off. The retailer saw a 3.2% increase in same-store sales for the five weeks ended Oct. 6, vs. a 6.2% increase in the year-ago period. The company isn’t offering any projections on the fourth quarter.
Shopping centers are looking to the holiday shopping season with guarded optimism. They’re moving ahead with typical promotions, such as photos with Santa and holiday displays.
“We’re confident that we’re going to get people in the door,” MainPlace’s Hiepler said. “But we just don’t know what goods are going to be purchased and what consumer spending habits will be.”
MainPlace’s traffic has picked up since the terrorist attacks, Hiepler said. He noted that sales were down vs. a year ago in September and flat in October.
Traffic also has picked up at South Coast Plaza, particularly on weekends, according to Downing. She said the center entered the fourth quarter with an overall sales increase and is “guardedly optimistic” about the holiday season.
“The mood is shifting on a daily basis,” Downing said. “So trying to project a month or two months down the road is difficult right now.”
Merchants at The Marketplace Tustin/ Irvine are hoping for “healthy” holiday sales, according to manager Karol Reedy.
“Everyone’s pretty positive and trying to get into the holiday spirit,” she said. “(They) hope that the customers will continue to shop here and see a lot of new stores opening this season.”
For year’s end, Reedy said, the center expects sales to be up 5% vs. last year,an increase, but not as dramatic as the 20% jump seen from 1999 to 2000, when the Marketplace opened up a new phase with a large number of tenants.
To be sure, it’s a tough time to open a new store. Target Greatland opened Oct. 14 in Fullerton’s new Amerige Heights development to initially light crowds, which since have picked up.
“We know the business is going to be here,” said Matt Urias, executive team leader of hard lines.
The bigger concern on Target’s mind is figuring out what merchandise mix to carry, he said.
“We’re kind of on a learning curve, just seeing what guests are going to like and want and how we can prepare for next year,” Urias said.
Carl Womack, Pacific Sunwear’s chief financial officer, said retailers are going into the holiday season hoping to do as little as possible in the way of promotions, discounts and special pricing.
“Once they get into the season, they’ll see the competitive landscape,how business has started out,and they’ll adjust from there,” he said.
But others already see a developing boon for consumers.
“You walk through the mall today and you see all kinds of promotions: two-for-one deals, 50% off merchandise,” Cherbak said.
Added MarketPlace’s Reedy: “I think that many of the merchants may be doing additional promotions and advertising for special sales to try and keep sales going this year.”
Cherbak said he expects to see more promotions the day after Thanksgiving, since retailers “don’t want to get stuck with inventory that they’ll ultimately have to take deeper markdowns” on by Jan. 1.
“They’ll be very promotional to drive foot traffic and do whatever they can to meet their sales plan,” he said. “And that most likely will be at the expense of their profitability.” n
