A grim year is in store
After a dismal holiday shopping season marked by discounts that failed to lure buyers, struggling retailers face what could be a very unhappy new year -- one filled with thousands of store closings and a shakeout of the weakest players.
That will mean fewer choices for those consumers who still have money to spend.
“Overall, it was a very weak holiday season, and it’s going to flow over to the first half of next year,” said Jeff Mintz, an analyst with Wedbush Morgan Securities. “Those that survive will be in a better position because the competition will be reduced, but for right now it’s a very difficult time to be a retailer.”
In the coming months, troubled retailers will take desperate actions to stay afloat, including closing redundant or underperforming locations and filing for bankruptcy protection to restructure business operations. Some big names will join chains such as Mervyn’s and Linens ‘n Things Inc. by exiting the shrinking market altogether, analysts predict.
Roughly 73,000 stores may close in the first half of next year, according to the International Council of Shopping Centers. As store vacancies rise, a number of small shopping centers could also be at risk, said Michael Niemira, the council’s chief economist.
Retailers who don’t have plans to close stores are taking other measures to weather the tough times ahead, including delaying store openings, hiring fewer workers and stocking less merchandise.
“We’re running our inventories very lean because we’re not sure what the consumer behavior is going to be in the first quarter, and we’re planning weekly promotions,” Disney Store President Jim Fielding said. “Our mantra is to control the controllable. We can’t control consumer behavior and we can’t control the macroeconomy.”
Target Corp. has reduced the number of stores it plans to open in 2009 and is heavily advertising the chain’s low prices, spokeswoman Hadley Barrows said.
“Sales continue to be challenging and consumers are really cautious,” she said. In the new year, “we’re focusing more on the ‘pay less’ side of our ‘expect more pay less’ brand promise.”
Amid concerns about a huge post-Christmas fallout, retailers still have to fight for customers: In recent years, January has gone from being a clearance month to a revenue-generating month, led by gift card redemption and shoppers picking up items for themselves rather than to give as gifts, said Marshal Cohen, chief industry analyst at market research firm NPD Group.
But Cohen said many of the latest deals being rolled out by retailers weren’t that great. In some cases, markdowns are simply being taken on merchandise that already had been discounted, he said.
“No matter how great the deal is, if I already have it, I don’t need another one,” Cohen said. “Traditionally at holiday time you have a fresh flow of new merchandise. That didn’t happen this year.”
While shopping in downtown Los Angeles on Monday, Laura Metzger, 31, said she was largely unimpressed despite some hefty discounts.
“They didn’t have the sales I was looking for,” said Metzger, a customer service coordinator from Hollywood Hills. “The bargains that they had weren’t in my price range.”
Retail experts said a lack of compelling merchandise in many areas, including toys and electronics, further hurt sales during the crucial holiday shopping season.
In the apparel sector, stores “went really conservative in terms of taking chances” on new styles, preferring to play it safe by stocking mostly basic items, Mintz said.
“There’s just not a lot of interesting new trends,” he said. “Compound that with the difficult consumer environment, and people just have no reason to buy.”
After a lunchtime workout downtown, Victor Reynaga didn’t stop to shop even though his gym is next to a number of stores boasting big discounts, including Macy’s and Express.
“You always want to pick up some stuff afterwards because of the sales,” Reynaga, 33, said of post-Christmas bargains. “But everybody, including myself, is tightening up.”
During the holiday season, Reynaga, a sales manager from East Los Angeles, watched his budget and finished his shopping early.
“With the economy, I limited myself and shopped for only what I needed,” he said.
Preliminary holiday sales figures released Friday showed that, as expected, most retailers suffered heavily even as they slashed prices and offered deals to entice consumers.
Retail sales fell 5.5% in November and 8% in December through Christmas Eve compared with a year earlier, according to data tracker SpendingPulse, a unit of MasterCard Advisors.
Many categories, including footwear, apparel and electronics, registered double-digit declines from Nov. 1 through Wednesday compared with a year earlier. Luxury goods did especially poorly, with sales falling 34% from the same period last year.
Major chain stores will release December sales data next week.
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mark.medina@latimes.com
