Retailers glow with hope for a holiday boost

The job market is better and oil prices are down, improving holiday shopping outlook.

Only six weeks ago - right before the election - retailer Joyce DeBastiani hesitated before restocking. She wondered how her customers in Honesdale, Pa., would react if there were a political shift, or even the turmoil of a contested election.

Now, she's glad she placed her orders: Her shop, Wallflower, a mini department store that sells clothing and gift items, is already running out of some educational toys and large stuffed animals. "Consumers are definitely not fearful," she says.

Friday, as shoppers hit the stores on one of the biggest retail days of the year, merchants such as Mrs. DeBastiani are breathing a sigh of relief: It looks as if it will be a solid, profitable season.

Strong holiday buying would give the nation a year-end lift, particularly since consumer spending represents two-thirds of all economic activity. And healthy sales levels would force businesses to rebuild inventories, which would stimulate more growth. "It will add a nice little boost when most economists expected the economy to continue slowing in early 2005," says Mark Zandi of "The economy would start next year with a bit of momentum."

Although the end of election rancor seems to have been a turning point, there are factors boosting consumer confidence. Oil prices are off their highs. The stock market, disappointing most of the year, is starting to strut. And the job market, while still not great, appears to be getting better.

All these elements will help lift the holiday season, says Richard Feinberg of the Purdue University Retail Institute in West Lafayette, Ind. "I think it will be a very good buying season," he says.

It may be good, but it probably won't match last year, when tax cuts and mortgage refinancing buoyed consumers, and holiday spending rose 5.1 percent. This year, the National Retail Federation is projecting a gain of 4.5 percent, which is about the average for the past 10 years.

"There will be a lot of sales to get people in the stores, but they are planned because retailers have kept inventories under control like last year," says Scott Krugman of the NRF.

In New York, one shopper enjoying the early sales is Lunique Menard, originally from Haiti and now living in Brooklyn. At Macy's, she and her fiancé found an engagement ring on sale for 50 percent off, with an additional 20 percent reduction from a coupon. "At Christmas it's really good," she says of the prices.

The US has also become a magnet for Europeans, shopping with a more muscular euro or pound. Ann Paget of Teesside, England, came to New York with 20 friends to celebrate a birthday and shop. She bought a Calvin Klein sweater at Macy's for $50, about half the original price, and estimated it would sell for 70 or 80 pounds in Britain. "The value of your money is higher here at the end of the day," she says.

Friday, retailers are expecting many more shoppers - up to 130 million of them on the day known as Black Friday because it's the day when retailers go from red to black (profitable) on their accounting books.

Some of them will end up at Bone Appetit, a Chattanooga, Tenn., gourmet pet store and bakery. Coats for dogs sell for as much as $150, sweaters cost $10 to $40, and a chef bakes fresh treats for the animals every night.

"People are finding they feel better spending money on their pets who appreciate the gifts more than their children do," says Joan Nash, the co-owner. "Every year it gets larger and larger, and Black Friday is usually one of our biggest days."

Just down the street from Bone Appetit, Heidi Swartz sells high-end cookware at Mia Cuchina. Like DeBastiani, she's noticed a change in consumer psychology now that the election is over. "People were edgy. There was a possibility of another terror attack," she says. "Now, we're back to regular life again. People want to cook and food is comforting. I sense people are going back to the old American attitude of doing the best they can."

This is also the time of year when Americans are adept at shopping for bargains and waiting for sales. For example, retailers expect many people will receive gift cards and will wait to use them in the new year. "A $100 gift card spent in January can have the buying power of $150 or $200," says Mr. Feinberg.

Indeed, in Clovis, Calif., many shoppers will be waiting for Hollyhocks's Jan. 1 sale. "It's one of our better days, almost better than the day after Thanksgiving," says co-owner Joe Bills, who anticipates a 5 percent gain in sales this season. "We will be swamped with people."

Christine Armario contributed to this report.

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