It was probably too warm to shop
Worry and warm weather squelched spending last month, upping the odds that retailers will have to slash prices to attract shoppers this holiday season and adding to anxiety about the economy.
Thomson Financial estimated Wednesday that sales at stores open a year or more were up 2.1%, half the gain notched in September 2006. The International Council of Shopping Centers made a similar prediction, noting that it would be the weakest advance in five months.
Thomson pointed to the distress in the credit and housing markets and crude oil prices that are above $80 a barrel. “All these issues remain a worry for the overall economy,” it said in its monthly retail report.
The week was loaded with negative industry news. Children’s Place Retail Stores Inc., PetSmart Inc. and American Eagle Outfitters Inc. cut third-quarter profit projections. Robert W. Baird & Co. said September was the worst month this year for independent sellers of surf, skate and snow apparel, warning that holiday orders could be “scarce.”
A Piper Jaffray report said that parents’ spending on clothes for teenagers had fallen 33% since the spring and that adults were spending 23% less on themselves, suggesting that “the average consumer is tightening the reins.”
The government predicted that Americans would pay 10% more to heat their homes this winter -- another jab at disposable income.
One culprit in September was warm weather, which didn’t make fleece hoodies and other autumn merchandise very tempting. Nationwide, it was the eighth-warmest September in 113 years of record keeping, according to Weather Trend International in Bethlehem, Pa.
But there was more going on -- more of what has been worrying the retail industry for months. Americans are in a penny-pinching mood.
“We are definitely trying to spend less on the holidays,” said Heidi Saldana, a 26-year-old student from Huntington Beach who is expecting her first child in May with husband Oscar, 25, a mechanic. “Our money is just too important to be blowing on useless gifts that people probably won’t use. We’re going to go down to pretty much buying cards and presents for a close few in the family.”
In fact, she said, they might make the cards.
Sales at stores open at least a year, known as comparable- or same-store sales, have been wimpy since February. The average monthly increase in retail sales so far this year is 2.4%, down from 3.9% in the same stretch last year.
Foot traffic in stores and malls has been lower year-over-year in seven of the last eight months, according to ShopperTrak. People have been cautious as they’ve pondered declining housing prices and high energy prices and have watched the interest rates on their adjustable mortgages shoot skyward from as low as zero.
BIGresearch, which surveys 8,000 shoppers every month, said Wednesday that more than $47 trillion in variable-rate home loans would reset in the coming year, affecting millions of households. People are cutting back on buying durable goods -- items such as cars, appliances and furniture -- as well as clothes and groceries and on eating out, the firm said.
“A lot of disposable income that would have been spent on Christmas is being allocated to the bare necessities, which is your home, your utilities and your gasoline,” said Patricia Pao, owner of Pao Principle, a New York firm that helps businesses develop turnaround strategies.
As a result, markdowns are likely to be both lower and earlier this year.
Wal-Mart Stores Inc. fired the first shot last week by announcing price cuts on toys and saying more cuts would be offered each week. A day later, Kohl’s Corp. said it too would be aggressive about its promotions because “that’s the only way you’re going to get this consumer motivated.”
Some don’t need prodding. Big spenders are expected to keep splurging for the holidays.
“The haves are going to have a very good year because people still have dough,” Pao said. “Luxury-goods makers are literally having no trouble selling a $52,000 handbag. Louis Vuitton made 24 of them and there’s a waiting list.”
Stay tuned. Chains release September sales numbers today.
