Sep 18, 2009
Gloomy US holiday shopping seen despite upturn
Sep 18, 2009
By Carey Gillam - Analysis
KANSAS CITY (Reuters) - Signs that the U.S. recession is coming to an end are not enough to spell a happy holiday shopping season, as retailers and consumers remain wary of more economic woes ahead.
To be sure, retail sales have shown a recent surge, and Federal Reserve Chairman Ben Bernanke said this week that the prolonged and painful U.S. recession is "very likely" over.
But industry experts and analysts say that as long as the unemployment rate remains near 10 percent, and home foreclosures continue to mount, consumers are likely to keep their spending in check. That means holiday gift-giving should remain miserly, even if better than last year.
"It is certain that we are not even remotely returning to anything that looks like Christmas two or three years ago," said retail analyst Patricia Edwards. "This year will be better than last year, but that will be cold comfort. Last year everyone was wearing sack cloth and ashes, and expecting the end of the world."
September and October are peak periods for holiday inventory buildup - a time when port workers, truck and rail companies typically scramble deliver to retailers the assortment of electronics, apparel, accessories, toys and games and other goods that stock shelves for holiday shoppers. That is not the case this year.
"We would normally in the past have seen significant upticks by now," said John Lanigan, chief marketing officer for Burlington Northern Santa Fe Corp (BNI.N), the No. 2 U.S. railroad, which delivers an assortment of goods around the country. "But we're not seeing any big uptick in volumes at all. With the consumer basically on the sidelines that doesn't portend a very robust upcoming holiday."
The lackluster outlook for the holidays comes despite news this week that U.S. retail sales rose at the fastest pace in 3-1/2 years in August.
The Commerce Department said retail sales climbed 2.7 percent after declining 0.2 percent in July for the biggest monthly advance since January 2006.
Still, much of that was attributable to the government's "cash for clunkers" auto buying incentive program, and not to a surge in consumer confidence, experts said.
"The consumer is still seeing unemployment rising. They are definitely saving more and spending a lot less," said Michael Dart, a principal at retail analyst Kurt Salmon Associates.
Dart said going into the holiday season most retailers were keeping inventories 5-10 percent lower than normal, while trying to determine what penny-pinching buyers will be willing to spend their money on.
Lower to mid-priced electronic items are seen as more appealing to consumers than some high-dollar accessories and trinkets might be.
"Retailers who do well will have the right merchandise at the right price," said Dart.
Betsy Blodgett, owner of the Bon Bon Atelier gift boutique in Kansas City said she and her partner are focusing their inventory on typical top-sellers like books and kitchen items.
"We really are focusing on core sellers and lower-priced items this year," she said. "With the season the way it is, we really need to buckle down."
In addition to curtailing inventories, some retailers are planning more aggressive marketing campaigns to lure in shoppers.
Store manager Chris Ohlinger, who runs a gift shop in Paradise Valley, Arizona, said he started a promotion program that rewards customers who bring in new clients to help push sales in this tentative recovery.
"I'm not expecting as lucrative or as busy of a holiday shopping season as I've had in years past, but I'm expecting a better one than in the past two years," Ohlinger said.
A silver lining of sorts was seen by some discount retailers like Dallas-based Half Price Books, which has 106 stores in 16 states.
"We do feel that customers will be watching budgets this year," said company spokeswoman Megan Kuntz. "But as a discount retailer, we are anticipating a great upcoming shopping season."
(Reporting by Carey Gillam with additional reporting by Tim Gaynor in Phoenix and Ed Stoddard in Dallas; Editing by Tim Dobbyn)
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