Retailers are hoping for a robust economy to lift their business in 2003, but most suspect theyll have to wait awhile.
Even optimists among 12,500 top retail executives gathered here this week for the annual convention of the National Retail Federation dont expect much improvement in consumer spending until the second half of the year.
“All Im hearing is expectations for modest sales growth, so youll have to get business from your competitors to grow,” said Martin Hanaka, president and chief executive of the Sports Authority, a sporting goods chain based in Fort Lauderdale.
In recent years, this national gathering of retailers has become an annual hand-wringing session over lackluster holiday sales, and this year is proving to be no exception. One presentation even featured a singer belting out the tune: “There’s got to be a morning after/ when it seems like the darkness will never end.”
“The consumer is ready to spend, but weve got to get all this Iraq-naphobia over with,” said Diane Swonk, a economist with Bank One in Detroit. “It has to be the most predicted war in history.”
Arnold Zetcher, chairman and chief executive of Talbot’s Inc., an apparel chain and catalog operator, said: “The forecasters may talk about a rebound in the second half, but Im only hearing caution from retailers. Frankly, that’s the same forecast we heard last year, and look how that ended.”
A big post-Christmas finish helped improve the results somewhat for the holiday selling season that ended Jan. 4. But retail federation economist Rosalind Wells expects the Commerce Department today will estimate that general merchandise sales, which includes everything from apparel to consumer electronics, rose about 3.5 percent during the two-month holiday season. That would be the worst season since 1998.
Industry leaders note that this year’s performance was skewed by price deflation of 2.8 percent. That meant retailers had to sell more stuff just to stay even with last year.
The federation tried to paint a happier face on a holiday performance that fell slightly short of its forecast of a modest 4 percent gain. Others said the results showed a lot about the frugality of today’s consumer.
“The post-holiday improvement only turned what was going to be a disaster into merely disappointing,” said Bill Wolfe, an analyst with Goldman Sachs. “This was the most price-sensitive holiday season in years.”
“If sales grew 3.5 percent, they get half that much just from the growth in the population,” said Walter Salmon, retailing professor emeritus at Harvard Business School.
Some warnings of doom and gloom during the holiday season were based on an index showing increases of less than 2 percent among chain stores open more than a year. That’s a benchmark used to compare one chain’s performance with another, not the health of consumer spending. However, because the same-store figure was the worst performance in three decades, experts expect renewed pressure on retailers to close more stores.
Still, some economists see the fact that spending was up at all as a positive sign, given workers fears over job security, the damage done to consumer confidence by Wall Street scandals and the shrunken retirement accounts of baby boomers.
For all of 2002, the retail federation estimates general merchandise sales increased 5.4 percent, and it predicts sales will rise another 5.6 percent in 2003. Most of the gain would be in the second half of the year and presumes there is no Persian Gulf war. The federation pointed to low interest rates, minimal inflation, improved employee productivity and the likelihood that companies will begin investing in future growth again after two years of incessant cost-cutting.
“Im encouraged about the second half of 2003,” said Walter Loeb, a longtime industry analyst. “The problem is: Will there be a war or not? I dont see any big improvement in consumer spending until that uncertainty is resolved.”
Ron Sacino, chief executive of Sacino’s Formal Wear, a St. Petersburg chain of 25 stores, said, “If there is a war, were hoping it is a very quick one.”