Not A Ghost Of A Chance Of Christmas Past

Don't ask Jeanette Guam how she feels about Christmas shopping this year. Guam, a 37-year-old hospital administrator in Boise, Idaho, used to love to lavish gifts on her family. But Guam's sister just lost her job, and Guam fears she is facing a pay cut. So during the holidays this year, she's limiting her purchases to just mne gift per relative. "I would love to splurge," says Guam,"but I'm trying to save."

Consumers will hit the malls en masse in a month or so to begin their holiday shopping. But spooked by the prospect of higher taxes, increased health-care costs, and a lackluster economy, they're planning to avoid huge purchases and do without frivolous stocking-stuffers. The result: Retail sales will rise just 3.5% this Christmas, down from a 7.2% increase last year, predicts Kurt Barnard, president of Barnard's Retailing Consulting Group in New York (chart).

Gloomy tidings, indeed, for retailers who depend on the season for some 40% of revenues. A weak Christmas season is expected to limit operating profits at specialty stores to a 2% gain from 1992, and hold department store profits flat. Discounters should fare better with a projected 4% gain.

IMITATORS. There are some positive signs for the nation's stores. The Conference Board reported that consumer confidence inched up to 62.6 in September, from 59.3 in August. Personal income rose 1.8% in July from a year ago, and consumer spending jumped 3.8% in the same period. But consumer debt rose 8.11% in July, says Carl Steidtmann, chief economist for Management Horizons--and those maxed-out credit cards won't spark holiday shopping.

This year's back-to-school sales, usually a fair indicator of what Christmas will bring, show why specialty apparel stores probably will feel more of a pinch than mass merchants and discounters. Same-store sales fell at The Gap, The Limited, and Ann Taylor Stores during August. One reason for the slowdown: Consumers have become more budget-conscious than fashion-conscious, says Janet Mangano, a retail analyst at Burnham Securities Inc. The Gap may have fallen victim to inexpensive imitators. And analysts believe The Limited and Ann Taylor have been hurt by a shift in taste among professional women, many with young children, who are redirecting clothing budgets from office wear to clothes for around the house.

The trend spells opportunity for Sears, Roebuck & Co. Arthur Martinez, Sears's merchandise chairman, is trying to position the beleaguered store as a chic and cheap alternative to more expensive apparel chains. Emboldened by the $40 million women's apparel advertising campaign that Sears launched in September, Martinez vows: "I believe we can outperform the industry during the fourth quarter. I will better whatever the industry produces."

Even so, Sears admits to being "cautious and conservative" in its purchasing for Christmas. Likewise, a J.C. Penney Co. spokesman says the retailer will carry only enough inventory to cover a projected "midsingle-digit" sales gain. Among the items it expects to sell out: cozy Yarnworks cardigans and pullover sweaters, both at $39.99.

Allen I. Questrom, Federated Department Stores Inc.'s chief executive, remains optimistic. This holiday season, Federated will agressively market housewares. The company's customers, he says, are "nesting" and just as interested in dressing their homes as themselves. That's why Federated's chains--among them Bloomingdales, Abraham & Straus, and Rich's--are loading up on such items as Calphalon's nonstick cookware, wooden picture frames, and hand-stitched quilts, as well as luxurious $1500 leather couches. Other chains are exploiting the at-home trend, too. Home Depot Inc., the $7.1 billion home-fix-up chain, is launching a campaign to push power tools as ideal Christmas gifts.

Perhaps Home Depot should start selling toys, too. Analyst Jill S. Krutick of Salomon Brothers Inc. estimates combined toy and video-game sales will jump 15% this season, which could lead to gains for Toys `R' Us Inc. and Kmart Corp. Toys `R' Us will have the added benefit of decreased competition: Child World Inc. and Lionel Corp.'s Kiddie City have gone out of business.

But the real Christmas bright spot is home shopping. QVC Network Inc., currently embroiled in its bid to acquire Paramount Communications Inc., should post a sharp 21% earnings gain for the Christmas quarter, analysts say. Just more evidence that the consumers who want to spend money are the same people who increasingly want to stay at home. Ann Taylor, take note.

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