Retailers Start Shopping Season Early, but Consumers Are Cautious

Analysts project modest sales gains, pressure on profit margins

MANY retailers, worried about sluggish sales, are bringing Christmas tinsel to their stores even before putting away the Halloween jack-o'-lanterns.

``The balls of pine and glitter are being strung around many stores now,'' says Janet Mangano, a retail analyst with Burnham Securities Inc. ``But the only time I can remember Christmas displays going up so early was a few years ago on Oct. 10. But that was in the middle of a recession.''

``This is a very challenging economic environment for retailers,'' Ms. Mangano says. ``American consumers are shopping closer to their actual needs than ever.'' That means, she says, that they are ``waiting to the last minute'' to make purchases and then basing decisions on value. Many retailers could see ``flat to only modest sales gains for 1993,'' Mangano says.

The retail industry has become increasingly important to the United States economy in terms of jobs. Wal-Mart is the second largest employer in the US, behind General Motors Coporation. Last year, between September and December, consumers were spurred on by the euphoria stemming from the election of a new president. Retail sales rose 5.4 percent for the year to $1.9 trillion, up from a negligible rise of 0.9 percent in 1991.

But the 1992 buying spree was also aided by a change in tax policy by the Bush administration which lowered payroll withholding levels. ``Consumers spent about $20 billion in the final months of 1992 that would have been spent on retail sales in the first half of this year,'' says Thomas Tashjian, a retail expert with First Manhattan Company, a financial services firm.

CONSUMER confidence, while rising, is still below last year's levels. ``Total retail gains this year will probably not be much above 2 percent to 3 percent,'' Mangano says.

``The problem is mainly related to one issue - jobs,'' says Kurt Barnard, who publishes Kurt Barnard's Retail Marketing Report. ``Americans are concerned about job availability and job security. The unemployment rate is coming down, but very slowly.''

``Surveys show that our retail members believe this is not a good climate for economic expansion'' and that economic conditions are more likely to ``get worse'' rather than better, says William Dennis, an official of the National Federation of Independent Business in Washington.

The National Retail Federation projects that total unit volume will rise 2.5 percent between now and Christmas and that cash sales will be up 4 percent over 1992.

Slower retail spending has already been felt at one major chain. Woolworth Corporation recently announced the closing of 970 stores in North America. Last year Woolworth also announced a series of closings. The latest round of cuts will slash 13,000 jobs from the payroll. Several other chains, including K mart, The Limited, and Dayton Hudson Company, are weighing possible downsizing steps, Mangano says.

On a store-by-store basis, retail sales are apt to grow 3 percent to 4 percent this year, Mr. Barnard estimates. But for an industry that was posting gains of 12 percent to 14 percent back in the 1980s, that is far from happy news, he says. ``Wall Street measures performance on a comparative basis; if sales gains are only flat, the investment community can be expected to turn thumbs down on the stocks of some publicly held companies.'' That limits the ability of retailers to ``attract capital needed for expansion.''

Thomas Tashjian, with First Manhattan, says that retailers are ``running cautious'' more than ``running scared.'' That explains why Christmas bunting is now appearing, he says. ``The stores want to get people in a spending mood now'' before retailers ``have to start marking down prices later in the fall.''

Still, most chains have taken steps to cut costs. ``Inventory levels are low,'' Mr. Tashjian says. Stores are maintaining existing levels of staff, rather than adding new employees. Apparel sales should rise 4 percent to 5 percent this year, he says.

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