Retail sales off to dreary start in ’08
It’s a new year filled with old problems for retailers, which are expected to report later this week that sales gains in January were skimpy to nonexistent -- possibly the weakest on record.
That could lead some major chains to lower profit forecasts and add fuel to recession predictions.
How bad was it? Sales were “near flat,” the International Council of Shopping Centers predicted Tuesday. If that forecast holds true when the official numbers are released Thursday, January’s results will be the wimpiest since the council began keeping track in 1970.
February may be better, said the council’s chief economist, Michael Niemira, but probably not by much. “We’re still struggling with a lot of these economic weights around the necks of the consumers.”
Thomson Financial was only slightly more optimistic, anticipating a 1% January sales gain at stores open a year or more, a key industry indicator. “If retailers really come in below 2%, it is definitely a worrisome level,” said Jharonne Martis, senior research analyst.
Thomson said department stores probably took the hardest hit, slipping more than 5%, and that luxury retailer Saks Inc. was probably the only one in that sector to log a gain. “Everybody else is expected to be negative,” she said, based on input from analysts who track traffic and inventory levels.
Indeed, foot traffic dipped 2.1% in January from the same time last year, said Bill Martin co-founder of ShopperTrak RCT Corp. “We’re seeing declines on top of declines,” he said.
Some stores had hoped strong gift card sales late last year would do more to give January a boost because they’re not counted until they’re redeemed. But Niemira said purchases of gift cards, as a share of total spending, were lower in 2007 than the year before.
January is typically a clearance period for retailers and the weakest sales month of the year. It’s also a time when apparel sellers haul out their spring offerings, hoping shoppers will pay full price for something new. That would boost revenue and profit.
It doesn’t seem likely that happened, Martis said. “So far, the estimates are poor for the apparel sector,” she said.
Luxottica Group Inc., parent of Orange County sunglasses maker Oakley Inc., saw “a lot of ups and downs” in December and in the first two weeks of January, said Luxottica spokesman Luca Biondolillo. Consumers seem to be shopping less frequently in its 4,500 North American stores, he said, but continue to buy higher-end merchandise.
“There’s still a great degree of uncertainty in spending patterns by consumers,” Biondolillo said. “Consumers are not certain about what’s going to happen next.”
Neither are the nation’s big chains. Profitability will be a key concern for retailers, who shifted into a new fiscal year this month, and more store closures are likely in 2008 than in 2007, Niemira said.
“Last year’s store closures were heavily dominated by housing and furniture,” he said. “We suspect it will be a lot broader than that.”
A wide array of economic woes is rattling consumers, who have been unnerved by ongoing problems in the housing industry, high fuel prices, shrinking stock portfolios and, last month, a weak employment report.
“In a nutshell, I think it’s the broadening of the weakness in the economy,” Niemira said.
As a result, many Americans are now focused on paying down debt, according to a recent survey by the shopping center group. That means that, if they get the anticipated tax rebate this summer, much of it will be funneled in that direction.
“Lenders will see more of the tax rebate than will retailers,” Niemira said.
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