We Need A Little Christmas Now

Too early to haul out the holly? Not for worried retailers

If only they had had Christmas in July this year. Retailers were placing critical orders for the holiday season--before the emerging-markets crisis had spread, the U.S. stock market had given back its 1998 gains, and consumer confidence had started to erode. The U.S. economy still seemed insulated from the global mess and in no danger of sinking into recession. Retailers placed big orders, assuming that the consumer-spending binge would last.

Now the question is, when December arrives, will retailers be stuck with warehouses of unsold goods? "We don't think you're going to see a lot of people just throwing money around over the next few months," says Marvin J. Girouard, chief executive of Pier 1 Imports Inc. "The buying binge is slowing down a bit."

To minimize the damage, retailers are maximizing the selling season. Weeks before Halloween, Christmas decorations are popping up in department stores. So are deep discounts, as merchants try to jump-start the holiday shopping spirit. "There's a lot of hand-wringing going on among retail executives," says Kurt Barnard of Barnard's Consulting Group.

How bad could it be? Consumer confidence, measured by business research group The Conference Board, has slipped for three months running, and stores have reported slower sales gains since the summer. September sales, scheduled for release on Oct. 8, are likely to be disappointing for many retailers. A consumer mood survey by Leo J. Shapiro & Associates shows about 27% plan to spend more this holiday season, down from 32% last year.

In addition to rushing the season, some retailers are taking defensive action. J.C. Penney Co. says it will delay taking delivery of clothing shipments to guard against overstocks. Sears Roebuck & Co. also plans to wait several weeks before deciding how much clothing to stock this season. Despite disappointing sales in August and September, Federated Department Stores Inc. says the company has no plans to alter its clothing purchases, according to a spokeswoman. But she adds that Federated, parent company of Macy's and Bloomingdale's, is "monitoring the situation closely."

Meanwhile, stores and malls are rushing out holiday decorations. Cherry Creek Shopping Center in Denver has already opened its seasonal Christmas On The Mall store, more than a month earlier than last year. Bed, Bath & Beyond Inc. has stocked holiday cards and gift wrap alongside its Halloween displays. "It gets people in the mood," says a store manager.

JUST A BUMP? Many stores are bringing out their biggest guns: price cuts. Athletic footware, usually hot in August and September, is as much as 50% off at Foot Locker. Macy's has already marked winter coats down, while a sale at Bennetton's includes price cuts on hats, scarves, and wool slacks.

The tactics may be working with some consumers. Annette Mayer of Paris, Tenn., says the price cuts are "good news for the shopper." She hasn't changed her plans to shop for children's clothes, some new baby furniture, and computer games this year. "The stock market has gone down, but it's just a bump in the road," she says.

While apparel sellers are concerned, other retailers can benefit from a thrifty season. Discount king Wal-Mart Stores Inc. saw sales at stores open at least one year rise 9% in September. Sellers of durable goods figure a more practical consumer will turn from clothing to their stores. "We just mailed our new catalog for the holidays and the phones are ringing already," says Bette Kahn, spokeswoman for Crate & Barrel. "That tells us business is going to be brisk." For some, at least.

    Before it's here, it's on the Bloomberg Terminal.