Cautious Retailers Not Buying Big for Christmas

Times Staff Writer

Sizing up the coming holiday shopping season for retailers is proving easy, with merchants’ visions midway between sugarplums and a lump of coal.

“It will be ho-hum instead of ho-ho-ho,” said Carl Steidtmann, vice president and chief economist of Management Horizons, a consulting firm in Columbus, Ohio.

Retailers, who have suffered through a sluggish year so far, have ordered cautiously and say they have no plans to repeat the frenzied discounting that turned last season into a bargain-hunter’s delight, marred as it was by consumer disinterest in fashions and skittishness after that October’s stock market crash. As a result, customers spoiled last year by the price cuts of desperate retailers will probably be disappointed this time.

But retailers, usually an optimistic lot, are low-key in their predictions for the holiday, categorizing their expectations as “reasonably good,” “not a barn-burner,” “respectable” or “cautious.”


Kurt Barnard, publisher of the Retail Marketing Report newsletter in New York, reflects the gloomy mood. “Retailers are faced with a Christmas that is going to be dull at the very best,” he said. “They’re trying to minimize the downside as much as possible.”

Retailers and economists expect the important fourth quarter--which usually accounts for one-third of merchants’ annual sales and 50% to 60% of their profits--to show only modest sales growth of 4% to 6%. After inflation is taken into account, that will mean real gains of a paltry 1% to 3%, compared with last holiday’s real growth of just over 2%. (In one respect, however, this may be a better year: If retailers can hold the line against price discounts, profits are likely to be improved over 1987.)

Such modest forecasts belie the fact that consumers appear to be heading into the holiday in high spirits.

“It’s clear that the American public views itself as doing quite well these days,” said Andrew J. Brown, president of Opinion Research Corp., a marketing research firm in Princeton, N.J. “People are working and money’s around. Nobody seems to feel he’s in bad shape.”


On the other hand, shoppers’ recollections of last year’s uneasiness have not dimmed, he noted. “Ever since last October . . . we have seen people indicating a desire to avoid major purchases and to do less credit spending,” he said. “And that has an impact on Christmas.”

Since September, 1987, when the nation’s savings rate hit an all-time low, consumers have been slowly rebuilding their caches of cash. Meanwhile, department store credit balances have been declining since February, said Thomas H. Tashjian, vice president of retail trade at the Seidler Amdec Securities brokerage in Los Angeles.

“Overall . . . the consumer sales trends are showing the impact of an aging baby boom (set) who are more attuned to their home, to saving a little more and to being a lot more practical about their spending,” he said.

Edward E. Yardeni, chief economist for Prudential-Bache Securities in New York, noted that the current economic expansion has lasted six years, the longest period of peacetime growth in history. “There isn’t a heck of a lot of pent-up demand left,” he said. “From here on, it’s just fundamental day-to-day needs.”

Sears Plans Blitz

Such a spending environment has proved especially difficult for the nation’s largest retailer, Sears, Roebuck & Co., which has watched its business deteriorate of late. This holiday it is mounting a television advertising blitz to “set Sears apart from the clutter,” according to Tom Morris, vice president of marketing.

At an estimated cost of $30 million, Sears has produced 27 different ads that will appear a total of nearly 1,000 times during the season and get an estimated 3.5 billion viewings. Each spot will feature a gift item of “an outstanding value” found only at Sears, Morris said.

The campaign, Sears’ biggest marketing effort ever, precedes the chain’s risk-laden strategy, planned for early next year, to cut everyday prices and eliminate heavily promoted sales. “We knew early on that we had a lot riding on the last six weeks of this year,” Morris said.


Other chains will bombard shoppers with a plethora of warm, fuzzy, sentimental ads. At Toys R Us, the theme “You’ll Never Outgrow Us” is aimed at capturing the growing number of shoppers who received Toys R Us gifts as children and now have youngsters of their own.

New Campaigns

Target Stores, an upscale discount chain, is for the first time using celebrities in its TV and radio spots, including Aretha Franklin giving a bluesy rendition of an original song called “Bringing Christmas Home.” And K mart’s campaign is tied in with a new photo book called “Christmas in America.”

Although retailers do not see any real blockbuster products in the holiday offering, they expect traditional items and some of last year’s favorites to be strong. Among the expected standouts this year will be “E.T.: The Extra-Terrestrial” videotape, the Pictionary game and Nintendo video games, consumer electronics gear, home furnishings and accessories such as hosiery, scarves and jewelry.

But even a so-so selling season could lift the retailers’ mood at the end of this lackluster year. Having been badly burned last season, merchants planned cautiously, stocking conservative supplies of goods to try to avoid unexpected markdowns.

By analyst Tashjian’s estimate, inventories on a dollar basis are down 2% to 3% at department stores and 17% at specialty apparel chain stores. At general merchandise and discount stores, they are about even with last year.

‘May Be Caught Short’

However, one economist cautioned that low supplies of items could hurt retailers--and frustrate those customers who wait until late in the season to shop.


“I think retailers may have a problem not having enough going into the Christmas season,” said Rosalind Wells, chief economist of the National Retail Merchants Assn. and president of Wells & Associates, a New York consumer research firm. “They may be caught short.

“I’m sure some of them will feel sorry they didn’t have more (supply) in certain areas, but I think they’re happier this way.”

Indeed, if sales come out as expected, merchants stand to show respectable profits for the quarter. Moreover, since their figures will be compared to poor numbers last year, “they really don’t have much of a hurdle to jump over to improve profitability,” Steidtmann said.

Signs of Rebound

In R. H. Macy & Co.'s West Coast operations, which include Bullock’s, Macy’s San Francisco, Bullocks Wilshire and I. Magnin, business has been “quite good,” said Macy’s Chairman Edward S. Finkelstein. Meanwhile, Macy operations in the East have started showing signs of a rebound in November after a disappointing year.

“We’ve noticed what we would identify as a significant improvement in the trend of our business,” Finkelstein said. “If that continues . . . short of some kind of a major trauma such as we had last year . . . we would expect to have a pretty good Christmas.”

Overall, holiday shoppers are expected to do little to revive the women’s apparel business, which has been in tatters for more than a year. At Carter Hawley Hale Stores, the Los Angeles-based owner of five department store chains including the Broadway, women’s clothing continues to be the area that “really isn’t going anywhere,” said Chairman Philip M. Hawley.

Economist Steidtmann agreed that “it’s still going to be a pretty tough year” for apparel because of the absence of “must-have” fashions and shoppers’ continuing resistance to higher prices.

Some Revival

At the few chains where the clothing business is reviving, merchants credit the improvement to a greater variety in styles and a return to traditional looks that appeal to working women. Last year, women resisted short, frilly styles as inappropriate. Macy’s, for instance, reports that sales of Ralph Lauren’s traditional designs is “really exploding.”