Tough sell
st1\:*{behavior:url(#ieooui) } /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:11.0pt; mso-ascii- mso-ascii-theme- mso-fareast- mso-fareast-theme- mso-hansi- mso-hansi-theme- mso-bidi- mso-bidi-theme-} Retail analyst Howard Davidowitz has one word for the retail outlook this holiday shopping season: horrendous.
“The consumer is in a financial crisis and that is going to be reflected in holiday sales,” Davidowitz, chairman of Manhattan-based Davidowitz & Associates Inc., a national retail consulting and investment banking firm, said. “Americans have been spending more than they”™ve made for the past 10 years, and the consumers who ran up the biggest debt in history had a free lunch and now they have to buy dinner.”
Davidowitz said holiday retail sales will be negative for the first time in 50 years.
In spite of President Bush”™s economic stimulus plan, which gave out checks to the tune of $180 billion, “retail sales were still terrible.”
Davidowitz said with the country $14 trillion in debt ”“ the most in history ”“ and an $8 trillion negative effect from the housing crisis, the consumer cannot access credit.
“We haven”™t even hit the wall yet,” Davidowitz said. “Half of Americans are involved in capital markets directly or indirectly, and that”™s down over 20 percent. The housing market is a train wreck, and 69 percent of Americans own homes. Credit card payments are collapsing. Consumer bankruptcies are going through the roof. Job losses are going to go through the roof.”
In Davidowitz”™s opinion, 8,000 stores in America will close this year, “and it”™s going to continue.”
Davidowitz said this holiday season, stores that sell “what people have to buy” such as food, will not be as negatively impacted as stores that sell apparel and home goods.
“The consumer is trading down,” Davidowitz said. “People are going to buy it cheap. They”™re in a crisis and they know it, and retail bankruptcies are going to continue to flow.”
For example, Starbucks is closing 600 stores, while McDonalds, which has entered the coffee market (at cheaper prices), has had sensational results.
He said discount retailers such as BJ”™s and Costco, which sell products at a 14 percent margin, will fare well against traditional food stores with a 25 percent margin.
Dr. Farrokh Hormozi, an economist and chairman of the graduate public administration department at Pace University in Pleasantville, has a more optimistic outlook.
“Americans as a society are consumers, and when things get tough we want to get out of it by spending,” Hormozi said.
Hormozi said consumers are likely to get rid of psychological financial pressures by going out and shopping this holiday season, which may contribute to a lower-than- expected drop in consumer spending.
“People”™s spending habits may be boosted by the excitement of the holiday season,” Hormozi said. “Right now we are in the midst of the negative excitement over the financial market. We are in a state of flux and we have not reached a complete decision-making frame of mind yet.”
Hormozi said he thinks high-end stores such as Neiman Marcus will be in trouble this holiday season, but mid-level stores like Macy”™s and Bloomingdale”™s will “be OK, maybe a one-digit drop there.”
As for independent retailers, “obviously it”™s going to be a tough year for all retailers, but what I am hoping is that this renewed interest in locally owned business will help insulate those retailers from the worst effects of the weak economy,” said Stacy Mitchell, author of “Big-Box Swindle” and senior researcher at the Minneapolis-based Institute for Local Self-Reliance, a nonprofit with a focus on strengthening local economics.
Mitchell said a survey conducted by the organization at the end of last year”™s holiday shopping season found that municipalities with active “buy local” campaigns had a “significant difference” in holiday sales.
The survey was conducted of 1,382 independent retailers across the country.
“We found that those in cities without a buy local campaign saw holiday sales increase by less than half a percent, and those with a buy local campaign saw a holiday sales increase of just over 2 percent,” Mitchell said. “It was not a great year in general, but that”™s quite a significant difference.”
Locally, retailers in downtown White Plains are gearing up for a possible decline in holiday shopping sales.
“When the stock market goes down 700 points in a day, people get nervous, and it”™s without a doubt that everybody”™s nervous about the retail holiday season,” said Rick Ammirato, executive director of the White Plains Business Improvement District.
Ammirato said overall, White Plains has always had a strong retail base.
“We have yet to see a slowdown in the economy to date,” Ammirato said. “We”™re hoping for a strong retail season, but we”™ll have to wait and see.”