Cursed by a sour stock market and a sinking dollar, retailers are preparing for a not-so-merry Christmas. Already, sale signs are popping up as fast as pine boughs, foreshadowing what could be a stellar season for bargain hunters.
Merchants and economists are particularly anxious about this holiday season because they figure shoppers' spending will set the tone for the nation's economy in 1988. Consumer spending has been weakening for several months, and retailers' hopes for a robust Christmas have evaporated.
Bombarded by news of a shaky economy, consumers, too, are wary. As a result, this holiday shopping season--which officially kicks off Friday--promises a high-stakes game of chicken and a cliffhanger ending.
"Retailers are very nervous," said Carl Steidtmann, vice president and chief economist at Management Horizons, a retail consulting firm near Columbus, Ohio.
Even before the stock market tumbled on Oct. 19, there was much concern about the strength of consumer spending at Christmas, noted Sandra Shaber, an economist with the Futures Group in Washington. Consumers were already buying fewer big-ticket items such as cars and major appliances, and specialty apparel stores were singing the blues about bloated inventories.
"Most retailers (felt) this would be a fair to middle Christmas but not one of the best," Shaber said. "Obviously, Black Monday increased this uncertainty."
At the Broadway department store chain, reality set in months ago as consumers' spending seemed to run out of steam. "We have never projected this season to be that flamboyant," said William D. McDonald Jr., senior vice president of marketing and sales promotion for the 43-store chain, which has more than $1 billion in annual sales.
"Are we nervous? Absolutely. . . . I don't think anybody with our kind of volume could deny that we're going to watch the message of the consumer. So far, the signal is maybe a little more caution."
Although Shaber believes that the economy won't necessarily plunge into recession, she fears that further market turbulence could prompt concerns about jobs and individual debt loads. "Some may try to save more and pay off debt," she said, "and then we could have a downward spiral."
For retailers, always a bunch of nervous Nellies at Christmastime, "this year it's a more tense situation," said Joseph H. Ellis, a retail analyst at Goldman, Sachs & Co. in New York. Although spending slowdowns have occurred at all types of retail outlets, stores selling women's fashions have been particularly hard hit, he said.
"That may relate more to confusion over skirt lengths and, to some extent, boredom with styles around for some time," Ellis said.
Allen I. Questrom, chairman of the Bullock's department store chain, agrees that apparel merchants have gone "once too often to the well" on some moderate ready-to-wear styles. And, he noted, most female customers aren't yet comfortable with the new, shorter hemlines.
However, he said, Bullock's is doing "terrific" business in designer and intimate apparel, children's departments, home decorations and menswear, with $60 ties going fast. Other brisk, high-priced sellers are cashmere garments and very expensive glass pieces by Baccarat, Lalique and Lladro.
Ultimately, economists say, merchants' success during the Christmas selling season will depend on how confident consumers feel. Only about a fifth of Americans own stock, so most were not directly affected by the Oct. 19 crash. But continuing publicity about the nation's economic woes could put a chill on holiday spending.
If consumers hold out for bargains, they could be in the driver's seat, said Richard T. Curtin, who directs consumer surveys at the University of Michigan. "The consumer is looking for a better buy. . . . To hold their competitive positions, (retailers) will have to offer large and frequent discounts," he said, adding that the industry's profits are likely to suffer.
Finding More on Sale
Attracted by early sales last weekend at Century City Shopping Center, Jessie Johnson of West Los Angeles ventured out ahead of her usual last-minute holiday shopping schedule. "This year I'm finding more on sale," she said. "That's why I'm shopping earlier." In another break with tradition, Johnson said her brothers and sisters decided not to exchange gifts this year. The stock market probably colored their thinking, she noted.
But for every unsettled Jessie Johnson, there's another American asking, "What's the big deal?" Bob Cahill, a 26-year-old employee in MGM-TV's payroll department, plans to spend as much as $600 on presents this year, about the same as last. Of the economy, he said, "I think it'll straighten out."
Such mixed signals abound, making the imprecise art of forecasting Christmas economics even more of an iffy affair this year. "At this point, the picture is inconclusive and spotty," said Robert T. Parry, president of the Federal Reserve Bank in San Francisco.