Here's the kind of a tale that will have retailers bellowing cheerful ho-ho-ho's this Christmas season:
Kimberley Wells and Louis Chunovic will close the purchase of a West Hollywood condo today, just nine days after their wedding and two months after Wells took the bait on a 2.9% auto loan. They also plan to start buying furniture and appliances soon.
Even so, the couple may spend as much as $1,000 on Christmas gifts this year.
"My new bride counts the days before Christmas starting on the day after Christmas," Chunovic said. "A few score thousand dollars of debt will not dissuade us from celebrating Christmas in as grand a fashion as we can."
Early Sales Strong
Chunovic, who is TV editor at the Hollywood Reporter, and Wells, a publicist and writer, represent just what the nation's retailers will be counting on this holiday season. Cheered over sales gains in recent weeks, merchants are expressing optimism that such spending on the part of debt-laden people will bring sparkle to a potentially lackluster Christmas season.
Shoppers can expect to see a fair number of bargains this year, but certainly not to the extent of two years ago, when out-of-whack inventories led to a price-cutting bloodbath. They'll find that gift items have arrived earlier than in the past at some stores and, since the season so far hasn't produced a single "must-have-it" item, they're less likely to encounter shortages.
Looming as drawbacks to a truly robust shopping season are record-high consumer debt levels and depleted savings, as well as the recessions in the agricultural and oil states. But even though statistics might indicate that consumers have run out of spending power, retailers are saying that this won't be the year the debt Grinch steals Christmas.
"The last four weeks have been surprisingly strong for us," Richard J. Dore, senior vice president and director in the hard-hit Houston region for Joske's department store, said last week. "I am pleasantly surprised at how the trend of business has reversed. I've become very optimistic."
Wal-Mart, a fast-growing discount store chain that is heavily concentrated in small towns in agricultural and oil-producing areas, is seeing "a very enthusiastic customer," said Charles Self, vice president for finance. "The customer is saying we're going to have a good Christmas season."
Signs of a Good Season
Dayton Hudson, which runs the Target and Mervyn's chains as well as Midwest department stores, reports lower credit delinquencies this year than last and improved business in the oil states. "It's one of the reasons why we think Christmas business will show a slight improvement over the rest of the year," Chairman Kenneth A. Macke said.
From Southern California to the Northeast, retailers are predicting a moderate Christmas, with fourth-quarter sales gains that average about 6% higher than those of the same period last year. Merchants emphasize that most of that will represent real growth, since there is so little inflation. With inventories and inflation under control this year, many retailers are poised for solid, full-year profit gains, assuming a respectable fourth quarter.
"I got very good vibes on Veterans Day sales," said Monroe Greenstein, a retail analyst with Bear, Stearns & Co. in New York. "If there's a surprise in Christmas sales, it's more likely to be on the up side." Greenstein expects retailers in the Northeast and California to see the biggest gains, and predicts "pockets of relative strength" in the Midwest.
'Pretty Strong' Sales
Many economists concur. Jim Cochrane, chief economist at Texas Commerce Bancshares in Houston, predicted "a pretty strong Christmas buying season in the United States as a whole, and in those parts of Texas that are more immune to oil-related troubles."
He acknowledged, however, a number of crosscurrents in the economy that make crystal-ball-gazing trickier than usual. Interest rates are at a 10-year low, and that might stimulate further spending on durables. Disposable income has been flat or declining, however, and the rate of savings has been driven to a postwar low.
On the other hand, in anticipation of tax cuts next year and continued relative stability of oil prices, much of middle America might feel a little freer to spend now.
"Next year, households will get a tax cut of $11.5 billion," said Allen Sinai, chief economist at the Shearson Lehman Bros. investment house in New York. "Granted, it will be in dribs and drabs, but that can offer some security when it comes to thinking of spending at Christmastime."
Here's another wild card: The same tax code revision that will put extra dollars into consumers' pockets will also end their ability to write off interest on credit-card debt and sales taxes on expensive items. Will this prompt a buying binge on fur coats, refrigerators and Ferraris this December, as people scurry to take advantage of these deductions for the last time?