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Retailers’ Bleak Christmas May Be the Worst Since ’82

TIMES STAFF WRITERS

Retailers in Southern California and around the nation looked in their stockings this Christmas season and found a lump of coal.

As shoppers visited the malls on Wednesday to exchange holiday gifts and to check the after-Christmas sales, industry analysts and officials were estimating that sales for the holiday shopping season will fall below most expectations, making this possibly the worst season since the recession of 1982.

“It looks as though people don’t have money to spend,” said Joyce Free, who was shopping at Topanga Plaza in Canoga Park.

“I don’t know of anyone who is happy,” said E. Harlin Smith, a spokesman for Los Angeles-based Carter Hawley Hale Stores, which owns Broadway-Southern California and three other Western department store chains.

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Because retailers generally earn half their profits during the Christmas shopping season, analysts said this year’s poor sales could spell trouble next year.

“I think what makes it particularly worrisome is that, unlike 1982, this is now a heavily leveraged industry, and a lot of the major players require a large amount of cash flow to service their debts,” said Ira Kalish, an economist with the retail consulting firm Management Horizons in Columbus, Ohio. “The seriousness of this downturn will only accelerate the process of shakeout and consolidation in the retail industry.”

Analysts and industry executives blamed the poor sales on the recession, the weak dollar, high interest rates, fears of unemployment and worries about the Persian Gulf crisis.

Unseasonal weather also may have hurt. Extreme cold, snow and flooding in the West kept shoppers away, while surprisingly mild weather in the East hurt apparel sales.

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Meanwhile, at malls across Southern California there were signs that shoppers were still being cautious the day after Christmas, traditionally one of the busiest shopping days of the year.

Free said that last year she headed to Topanga Plaza first thing in the morning, but was stuck there until noon because of the crowds. This year, “I was out of there by 9:30,” she said.

In the parking lot outside, valet parking service manager Alfredo Mena of Glendale said he had parked only 20 cars by 10:15 a.m., more than two hours after the mall had opened. “Last year it was madness,” he said.

Of course, there were some hot spots. The California Highway Patrol issued a major traffic alert when shoppers jammed freeways to South Coast Plaza in Costa Mesa.

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And in Brea, shoppers mobbed a Knott’s Berry Farm gift store in the Brea Mall when employees accidentally put out a sign advertising 70% markdowns.

The sign should have read 50% off, but by the time employees discovered their mistake, a sales line had snaked out into the mall corridor with many shoppers holding caseloads of jams, jellies, syrups and other popular Knott’s items.

“I came and saw the crowd and I jumped in there,” said Steve Dallape of Fullerton. “I’ve got gifts for the next three years. Before Christmas, it would have cost me a paycheck.”

For the season just ended, final sales results will not be in for weeks, but most analysts said not even a surge of buying the last weekend before Christmas could salvage the season, officials said.

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Many merchants reported that their sales at stores open more than one year--known in the retailing industry as same-store or comparable-store sales--were flat or down from a year ago. Taking into account inflation, which is running at more than 6% this year, the figures would look even worse.

Total sales were either flat or fell an average 3% from a year ago in inflation-adjusted dollars, analysts estimated.

Some early results:

* Smith declined to say how Carter Hawley’s sales in December compared with a year ago, but he said results appear to be better than they were in November, when same-store sales declined 7.4% from a year earlier.

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* At Chicago-based Sears, by some standards the nation’s biggest retailer, officials said sales were lower than expected, despite improvement in late December.

* K mart reported that both total sales and per-store sales would be up slightly over a year ago.

* J.C. Penney Co. said its comparable-store sales were down “slightly.”

* Dayton Hudson reported mixed, but generally weak results, particularly among its more upscale department stores in the upper Midwest where sales fell 2% to 3%. Dayton Hudson’s Target discount division was the top performer, with sales gains estimated at 1% to 2% from a year ago. Mervyn’s, its moderate-price department store chain based in Hayward, Calif., reported sales that were roughly even with last year’s.

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Overall, customers were choosier, bought less, avoided luxury and big-ticket items and went for necessities, merchants said.

“Instead of buying $400 to $500 attache cases, they were buying more of the $200 ones,” said Angie Kindle, assistant manager of John’s Fifth Avenue Luggage in San Diego.

As a further sign of the trend, one of the season’s few big gainers was Pic ‘N’ Save, the Dominguez-based close-out chain, which said its sales rose in the “high single-digit” range.

“When people get worried about the economy, they look to stretch their dollars more,” said Steven J. Miral, senior vice president of Pic ‘N’ Save.

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At ANA Discount Photo and Appliance in San Diego, manager David Vandegrift said sales of major appliances such as washers, dryers and refrigerators went poorly this Christmas season, and Wednesday morning sales got off to a slow start despite reduced prices.

J. C. Penney said its sales defied the pattern somewhat. Spokesman Duncan Muir said some of the company’s higher-priced items sold very well in categories such as dresses and sportswear.

But sales of cosmetics and fragrances--which consumers usually buy in lieu of more expensive gifts--also did well at J.C. Penney stores, and the company’s weak sellers were pricey items such as luggage, furniture and home furnishings.

Overall, the poor sales could mean trouble for some retailers. “There’ll be some bankruptcies, particularly of smaller companies that have gotten in difficulty and couldn’t handle a 10% or 12% drop in sales,” said Kurt Barnard, publisher of the newsletter Retail Marketing Report.

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But others said things might not be so bad. “Fortunately for the retailers, they were not anticipating a good season, so they canceled as much merchandise as they could prior to the season; they also took pre-Christmas markdowns and shrank inventories as much as possible” and hired less part-time help, said Monroe Greenstein, an industry analyst with Bear, Stearns & Co. in New York.

As a result, “Earnings will not be as bad as you might expect looking at the sales,” he said.

Times staff writers Chris Kraul in San Diego and Chris Woodyard in Orange County contributed to this report.


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