Retailers brace for austere holidays

Stores adjust as worst season since '91 forecast

By Joyzelle Davis, Rocky Mountain News (Contact)

Published October 11, 2008 at 12:05 a.m.

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Photo by Darin Mcgregor / The Rocky

Snow globes brighten a shelf at Tuesday Morning in Glendale as the retailer tries to get a jump on what is expected to be a challenging holiday season.

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It's beginning to look a lot like a nail-biting Christmas for retailers, who are facing what some analysts predict could be the worst sales season since the 1991 recession.

Consumers are snapping their wallets shut in the face of higher food and gasoline prices, depressed home values and a swooning stock market. Added to that, retailers have five fewer shopping days than 2007 due to a late Thanksgiving.

In response, stores are planning to hire fewer seasonal workers, emphasizing value and rolling out holiday promotions earlier than usual. Some 60 percent of national retail chains surveyed by the Hay Group plan to run more sales in December this year.

"It's going to be a very aggressive Christmas," said Craig Rowley, national retail practice leader at the Hay Group. "You're going to see stores promoting the holidays earlier, and the markdowns come quicker and sooner."

Wal-Mart, the nation's largest retailer, led the charge by announcing that it will open its Christmas shops a week earlier and is cutting prices on 10 popular toys to $10 each. Companies such as Target say they plan to focus on gifts under $25.

The holiday season is always make-or-break for retailers, who can make as much as 40 percent of the year's sales in November and December. Grim predictions for this year's holiday season began trickling out last month - and none of those had a chance to take into account the accelerating stock market rout of the past two weeks.

Market research firm TNS Retail Forward predicts sales to rise a mere 1.5 percent in the fourth quarter, the smallest gain in 17 years. The National Retail Federation expects sales to rise 2.2 percent, the slowest growth since 2002 and well below the 10-year average of 4.4 percent.

The Nielsen Co. released a survey Thursday showing that more than one-third of U.S. consumers across all income levels expect to spend less than in previous years, while 50 percent expect to spend the same.

Retailers such as Best Buy plan to highlight products such as video games and home entertainment products, anticipating that newly austere customers will be cutting back on restaurant meals and going out.

"Anything that allows people to spend time at home with their families is going to be big," said Jerome McKay, manager of the Best Buy in Aurora.

Nationwide, fourth-quarter hiring expectations in wholesale and retail businesses are at a 17-year low, according to a Manpower survey.

McKay couldn't discuss Best Buy's specific holiday staffing plans, but said the electronics retailer plans to staff up in order to keep customer flow smooth and to stay open the marathon hours that have become a hallmark of big-box retailers.

Ross Manning, senior vice president and general merchandise manager at discount home retailer Tuesday Morning, acknowledged that this holiday season is going to be "challenging," but he isn't pessimistic. The retailer has seen an uptick in new customers since August while older customers continue to come in even if "their buying habits might've changed slightly," he said.

The company also hopes to capitalize on the anticipated "nesting" trend as well, hoping customers will snap up crystal punch bowls and handcrafted nutcrackers to make their homes look more festive to compensate for not traveling.

"Our customer may not be going to Vail this Christmas or taking the kids to Hawaii, but the house will be decorative," Manning said.

davisj@RockyMountainNews.com or 303-954-2514

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