Retailing : Sales Slowdown Expected During First Half of Year, but Experts Say County Should Fare Better Than Less-Affluent Areas
After a three-year streak of bigger malls and fancier stores bringing in more consumer dollars, Orange County retailers are bracing themselves for sales growth to hit the brakes in 1988.
“Savings have been depleted . . . (and) consumers can’t keep spending more than they earn,” said Sarah Stack, retail analyst with Bateman Eichler Hill Richards in Los Angeles. “Consumers are at a crossroads in terms of their ability to keep spending.”
Low savings aren’t the only worry. Consumers also face slow growth in disposable income, high levels of debt service and concern caused by the stock market collapse.
In Orange County, industry experts expect that the uncertainty will translate into slow sales for at least the first half of 1988. But even so, the county’s miles of aisles are likely to fare better than less affluent areas.
After all, the county is the home of South Coast Plaza, the Costa Mesa megamall that again expects to lead the country, with projected 1987 sales of almost $700 million. Ten of the county’s 14 largest malls recorded sales of more than $100 million in 1986, the last year for which sales tax data is available.
To keep those cash registers ringing, local retailers are setting the stage for even more expansion in 1988.
So far three county malls have announced major renovations in 1988, and more are likely. The roster includes:
- Westminster Mall, where an upscale food court will be added next year as part of a 2 1/2-year renovation. Construction of the second phase should start in the spring.
- Brea Mall, where a four-year renaissance eventually will transform the 12-year-old mall into one of the county’s biggest, spiffiest shopping centers, with new Bullock’s and JW Robinson’s stores.
- In Newport Beach, Fashion Island plans to keep pumping millions into the fourth--and final--phase of its $35-million renovation. The expansion will add retail space and an entertainment complex to handle everything from concerts to fashion shows--giving the glitzy mall the nighttime entertainment offerings it lacks.
If details can be worked out, officials with La Habra Fashion Square hope to convert the outdated, 19-year-old mall into a promotional center with stores emphasizing lower prices.
It was make-overs like these that jogged sales this year at MainPlace/Santa Ana. In late September, the 29-year-old mall remolded itself into a bright shopping center with skylights, glass-tiled bridges and tree-lined avenues. After three months, MainPlace had surpassed its 1987 sales projections, said David Longbine, general manager.
The area’s two largest malls, Fashion Island and South Coast Plaza, also found out this year what a difference a face lift can make.
Both realized the benefits of costly expansions that were finished in 1986. For Fashion Island at Newport Center, that should translate to a 5% increase in 1987 sales over the $215 million logged the prior year. South Coast Plaza projects 1987 sales of almost $700 million, topping 1986 revenue of $500 million by about 40%.
In the restaurant industry, Carl Karcher Enterprises found that sprucing up its Carl’s Jr. restaurants with new signs, fresh paint and some chicken menu items were big factors in bringing record sales during 1987. By the middle of the year, the Anaheim-based restaurant franchiser had reversed a two-year slump, and it now appears ready to take a big bite out of California’s fast-food market.
But not all retailers prospered.
After years of sluggish sales, Buffums, the 84-year-old department store chain, reportedly went up for sale.
South Coast Village in Costa Mesa continues to plague developer C.J. Segerstrom, as a steady loss of tenants continued through the year. In June, a popular coffeehouse and bookstore, Upstart Crow & Co., abruptly closed its doors after its Berkeley-based chain declared bankruptcy.
And after riding the crest of a sales wave for years, Southern California’s surfwear industry appeared headed for a wipeout in November. Industry leader Jimmy’Z was acquired by Ocean Pacific. Irvine-based Maui & Sons was rumored to have cash-flow problems. A company that did business as Off Shore Sportswear filed for protection from creditors under federal bankruptcy laws.
Whether an anticipated economic slowdown will actually materialize next year is anybody’s guess. What is certain is more competition.
R.H. Macy & Co., one of the nation’s prime merchandising operations, is expected to plunge into the Southern California market next year by formally agreeing to become a major anchor tenant in malls in Orange County and West Los Angeles.
And Nordstrom four months ago announced ambitious plans to add at least 14 more stores across the nation, including at least two more in the county. That would give the Seattle-based chain at least five full-service Nordstrom stores and one discount outlet here.
To help avoid empty aisles, MainPlace this month started a shuttle service to ferry out-of-town customers from Anaheim hotels. “We’ve got to seek new ways to get those dollars here,” said general manager Longbine.
The impact of a weak dollar on tourism will bring in some overseas dollars. And Southern California’s broad-based economy means retailers here are less likely to feel the pinch of an economic slowdown.
Few are talking recession. And virtually nobody is predicting a retail disaster. “But retail is going to scramble to make 1987 figures again in 1988,” said Jim Charter, Brea Mall’s general manager.
So most retailers expect that they will be crossing their fingers for the first six months of next year. After that, “the best hope for a good retail season will be the fall and Christmas” of 1988, Bateman Eichler’s Stack said.
