Valley Retailers Face a Season of Uncertainty
With more than a month to go until Christmas, Viqui Denman of Agoura Hills is already scouring the region for presents. “I’m on a binge right now,” she proclaimed as she browsed through a gift shop at the Northridge Fashion Center.
Shoppers like Denman would seem to be good news for area malls. But she also represents a worrisome trend for retailers. Denman is balancing three part-time jobs and feeling uncertain about the future due to a pending divorce. And while her home was left relatively unscathed by the Northridge earthquake nearly two years ago, she still feels vulnerable because some of her close friends lost their houses.
So Denman is hunting for bargains. She found $7 wreaths at Pic ‘N’ Save. Forget about clothes, she said. Instead, she’s putting together “memory books” with photographs. And since she’s shopping early, she plans to save her receipts in case the items she buys now go on sale later.
“This has been a really tough year,” Denman said. “Every penny counts.”
And so it goes for local retailers when it comes to the tricky business of trying to read the minds of shoppers in this all-important season--when stores typically ring up one-third of their annual sales and half their profits.
Last Christmas, retail sales in Los Angeles County surprised everyone by rising 8% over the previous holiday season, said Jack Kyser, chief economist at the Economic Development Corp. of Los Angeles County. That was a welcome boost after the local retail industry had for years been fighting an anemic economy that lagged behind the rest of the nation.
This year, with sales expected to be lackluster nationwide, most local malls are anticipating sales increases of 2% to 5% over last Christmas.
Their expectations hinge largely on an improved local economy. Also, in a somewhat convoluted leap of logic, retailers are betting that consumers’ continued nervousness about the economy will help push sales of big-ticket goods such as computers and furniture--items that are perceived to have long-term value and are related to home comfort.
Nonetheless, local malls have good reason to be anxious this Christmas.
This is the first holiday shopping season since the January, 1994, Northridge earthquake in which the San Fernando Valley’s retailing landscape has returned to some semblance of normalcy--and that means competition has ratcheted up to an intense level.
The pressure will be great for the rebuilt Northridge Fashion Center, which reopened in August after being nearly devastated in the earthquake, and for Sherman Oaks Fashion Square, which was also badly damaged by the quake but is back in full operation.
Shirley Cowen, owner of the Country Works shop in Northridge Fashion Center, which sells folk art and gift items, said the upcoming Christmas is “critical to see if we can still maintain our business.” Cowen lost $60,000 worth of merchandise in the earthquake and had to move out of her damaged Chatsworth house.
“We’ve got wonderful things to make people happy,” said Cowen, as she showed off her collector plates, upholstered furniture and original artwork. But, she said, “early indications are it’s very slow. Not all the stores are open, and people are used to shopping elsewhere.”
Meanwhile, other malls that escaped major damage and benefited from increased traffic by earthquake-diverted shoppers are hoping to hold on to their gains.
“Last year was a phenomenal year” because many customers were replacing items destroyed in the earthquake, said Courtney Closter, director of retail operations at The Promenade, an upscale mall in Woodland Hills. But the earthquake insurance checks have begun to run out and the mall lost one of its anchor department stores, Saks Fifth Avenue. Still, Closter is hopeful that new attractions such as the KCET Store of Knowledge and a Wolfgang Puck Cafe that will open in December will help offset the loss.
Joy DeBacker, general manager of the Sherman Oaks Galleria, said it remains to be seen how hard the Galleria will be hit by competition from the remodeled Northridge mall this Christmas. Adding to the uncertainty is that many residents surrounding that mall are still coping with earthquake repairs, she said.
Still, DeBacker remains upbeat about her mall’s prospects for the season. “We’re probably more optimistic in California than in the rest of the nation,” she said. “You go through earthquakes and mudslides and it’s hard to say, “Can it get worse?’ ”
Maybe not, but predicting a merry Christmas is a dicey game for retailers because they’re also trying to navigate an economy that’s much improved but still full of potholes. The economy is growing, inflation is in check, key industries such as entertainment are flourishing and even the beleaguered aerospace industry has shown signs of bottoming out. But consumers still might keep a tight hold on their purse strings because real estate values continue to fall and thousands of jobs are on the line due to pending bank mergers and the county budget crisis.
That’s why many local retailers, while spouting optimism, are proceeding with caution, said Richard Giss, a partner specializing in retail at Deloitte & Touche, the accounting and consulting firm. Retailers have been burned in the past when they stocked up on goods, only to be stuck with products they must discount heavily after Christmas. This year, Giss said, retailers are ordering modest quantities of most merchandise. While that strategy will limit potential losses, it also means retailers “can’t have a really big Christmas even if consumers want it.”
Some observers are even more pessimistic. Michael R. Harris, a partner and consumer products specialist at Andersen Consulting, said that Valley malls such as Topanga Plaza in Canoga Park have been packed with early Christmas shoppers this year. But by the end of the season, he believes that sales will actually fall below last year’s level. The reason, he said, is a growing gap between the haves and the have-nots.
Harris predicts that items the “haves” can afford, such as computers and other consumer electronics, will sell well. But slow sales of apparel and other “soft goods” will hold total sales down, he said.
Nonetheless, some local malls are hopeful that their stockings will be full this Christmas.
Cindy Chong, general manager of the Glendale Galleria, believes that a strong local business climate--including the recent announcement by the DreamWorks SKG studio that it would locate its animation division in Glendale--will contribute to a brisk season. Plus, the mall completed a makeover this year that included replacing more than half its old stores with more upscale tenants such as FAO Schwartz toys, Williams-Sonoma kitchen goods and a Warner Bros. store.
The Media City Center in Burbank is also hoping to score big because of new stores, including a CompUSA computer outlet, Virgin Records and a Barnes & Noble bookstore, as well as new movie theaters. General Manager Dan Millman also thinks the mall will benefit from its increasing focus on food and entertainment--one new tenant, for instance, does laser tag games.
“That’s the direction the market is going in,” he said. “You need to differentiate yourself.”
Sherman Oaks Fashion Square, which was still doing earthquake repairs well into the Christmas shopping season last year, is expecting “a banner year” this season, said Jack F. Ohringer, associate vice president of City Freeholds USA, the mall’s owner. While other malls might suffer because of uncertainty in the economy, Fashion Square’s affluent customers “don’t get affected the way everyone else does,” he said.
And Fallbrook Mall in Canoga Park is projecting a 10% increase in holiday season sales--even after sales zoomed in 1994 while the Northridge Fashion Center was closed. General Manager Eric Knudson said the growth is expected because the mall is now nearly fully leased and so far appears to be hanging on to shoppers who migrated to Fallbrook after the earthquake.
But with competition fierce, malls are also turning up their holiday promotion machines an extra notch. The Glendale Galleria will have workers at all entrances to greet shoppers and answer questions, plus a computerized service to help customers locate specific items.
The Media City Center is planning the arrival of a cyberspace Santa on the Internet the day after Thanksgiving. On Dec. 9, it’s hosting a “block party” with disc jockey Rick Dees. The Antelope Valley Mall is expanding a promotion it started last year, when it photographed customers’ pets with Santa.
Northridge Fashion Center will have interactive games, an animation display and a train ride for kids in the Santa area.
“Our merchants are feeling very upbeat,” said Annette Bethers, marketing director at the Northridge mall. She expects total sales at the center to meet or beat Christmas sales numbers from 1993, the last holiday season it was open.
But Bethers acknowledged that predicting Christmas sales is a bit like forecasting the weather. “I’ve been in retail for so many years,” she said. “There’s really no science to it. It’s really a matter of wait and see.”