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1997 Rings Up Disappointing Sales

Retail: Despite strong economy, gains over last year are modest. Shifting consumer attitudes are cited.


Shoppers flooded malls and shopping centers across Southern California and the nation Friday, the first day of post-Christmas clearances and the final salvage opportunity for a retail industry that has suffered through a disappointing holiday sales season.

However, the slowdown in sales growth--the third consecutive year of modest sales gains--is a sign of seasonal caution that reflects a fundamental shift in consumer attitudes toward year-end spending, retail industry analysts say.

They had expected a moderately strong holiday sales season because unemployment and inflation have been low and the economy has been strong throughout the year. However, analysts now believe that consumers are more interested in investing, saving and paying down high personal debt. They also say consumers are feeling slightly nervous in the wake of stock market fluctuations and the turmoil in Asia.

Although many analysts had predicted a holiday season spending increase of 3% to 5%, they now say the sales gains will be 2% to 3%. This kind of showing, coming on the heels of a modest 3.5% sales increase in the 1996 holiday season, would fall far short of the 8% increase in 1992 and the year-to-year gains of the 1980s, when increases like the 10.6% rise in 1988 were the norm.

"Christmas is no longer the hot selling season it once was, and retailers will have to face up to new realities and find ways to attract more customers throughout the year," said Kurt Barnard, a New Jersey-based retail economist. "Consumer attitudes have changed and the year-end herd mentality has ended."

In a bid to reduce its reliance on year-end sales, the retail industry has made a more concerted effort to encourage consumers to shop for gifts earlier, offering sales promotions in October and November. But that effort may have backfired this year.

"Retailers hurt themselves by extending the sales season because that makes people more immune to hype," said Richard Giss, a retail analyst at the Los Angeles offices of Deloitte & Touche. "It was a disappointing season."


December sales are crucial for retailers. Some merchants generate 25% to 30% of their annual revenue during the period. And the post-Christmas sales season has become increasingly important in recent years as more bargain-hungry consumers--as well as those seeking refunds and exchanges--descend on shopping centers between Dec. 26 and Jan. 1. Last year, 11% of all late-season sales were generated during the six days after Christmas.

Those crowds were evident Friday as consumers flocked to malls and other shopping venues for bargains. Despite the jammed parking lots, retailers and mall operators were not any more upbeat about their their expectations for the entire month.

Jim Mance, general manager of the Ontario Mills mall, said he would "be happy" if seasonal sales in 1997 match those of last year, just after the mall's November 1996 grand opening.

Century City Shopping Center in Los Angeles also had a strong 1996--a sales increase of about 4%--after the grand opening of its Bloomingdale's store in November of that year. But Century City officials don't expect those kinds of increases this year.

"I think we'll have a small increase of 2% to 3% this year," said Doug Roscoe, general manager of the Century City center. "The Bloomingdale's opening created more interest last year, and to have any increase is good."

Many merchants have adjusted to the sales slowdowns by stocking less merchandise, but they still have excess inventory because many failed to meet their seasonal sales goals. "Consumers were not in a heavy spending mood and retailers were not prepared for this situation," said Ira Kalish, a retail economist at the Los Angeles offices of Price Waterhouse.

Kalish said the strong national and regional economy masked the fact that consumers are worried about high levels of personal debt and the stock market. Also, there are some concerns about job security in wake of recent layoffs at high-profile companies such as Levi-Strauss, Kodak, Singer and Kimberly Clark, said Kalish.

Analysts have also noted that the population is aging and that older consumers tend to spend less on clothes--normally a strong holiday-season seller--and more on non-store items such as travel.

Friday's turnout in Southern California and other parts of the country was at least as large as that of a year ago, though the size of post-Christmas crowds is not usually a good indicator of sales activity. Many join the mall masses to return or exchange unwanted gifts.

At Northridge Fashion Center, for example, Schovan Parker of Northridge arrived at the mall early to exchange a gift and to check out the sale at Robinsons-May, where she bought a $110 men's designer warm-up suit for $30.

Similarly, Beverly Diaz of Simi Valley showed up at the mall to return gifts at Macy's.

Others traveled to the Northridge mall but planned to spend little. Among them were Debbie Saenz of North Hills.

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