A murky Christmas sales season

On the heels of the last year's strong holiday shopping season -- the best in the previous five years -- the always optimistic National Retail Federation says retailers can expect similar success this year.

Not everyone is so sure.

Economists and business leaders say that the outlook for the 2006 holiday shopping season nationally and in Southeast Missouri is murky at best, especially in light of September sales results, which suggest that consumer anxiety about the economy is growing.

Discounters like Wal-Mart Stores Inc. had a solid month as Americans struggling with higher gasoline prices and the economic fallout from Hurricane Katrina shopped for basics. But results were disappointing at mall-based apparel stores including Gap Inc., Ann Taylor Corp. and Talbots Inc.

The question now is how generous will shoppers be during the holiday season, which is generally November and December.

Dr. Bruce Domazlicky, director of the Center for Economic and Business Research at Southeast Missouri State University, said he thinks a 5 percent increase over last year, the projection of the National Retail Federation, is overly optimistic.

He thinks that high gas prices and other energy costs will leave holiday shoppers with less disposable income. He predicts an increase over last year to be somewhere along 1 to 2 percent.

"These are real concerns," Domazlicky said. "People are spending so much additional money on gasoline. Energy costs for the winter are going to be high, a 30 to 40 percent increase over last year. It adds up. Consumer confidence has taken a big hit. You put that all together and it's hard to feel good."

Cape Girardeau Chamber of Commerce president John Mehner said that, traditionally, Cape Girardeau is shielded by national trends because it is such a strong economic hub.

But he sees gas prices as a wild card that can have one of two effects. He realizes that gas prices may injure the local retailers because they may not want to travel as far and may shop closer to home in places like Sikeston, Perryville, Poplar Bluff and Southern Illinois.

But it could also mean that people who travel from Southeast Missouri to metropolitan areas like St. Louis or Memphis may now decide to shop closer to home.

"That's just something we don't know," he said. "It's an intangible, and I don't know the answer to that question."

Another factor for this holiday season, Mehner said, is that Cape Girardeau solidified its retail base with major players coming to town. Kohl's, Sears Grand and the soon-to-open Steve & Barry's may excite some shoppers.

"The closest Kohl's used to be in Jefferson County, and Sears Grand is only one of six in the country," Mehner said. "It's hard to measure what [effect] that will have."

At local retail stores, managers said there were different reasons why they can't speculate. At Sears Grand, store manager Jason Harvey said the store is too new to gauge.

"But of course, we hope for good sales," he said.

At Famous Barr at Westfield West Park, manager Sharon Ebersohl said that their multimillion-dollar remodeling may provide a boost. But it's too soon to tell.

'Uncertainty is always bad'

But, surprisingly, amidst the remodel, August and September have been two of their better months this year, she said.

On the national scene, things could be even worse.

"Uncertainty is always bad for retailers," said Michael P. Niemira, chief economist at The International Council of Shopping Centers. "We have the same worries about gasoline prices, home heating and the sustainability of consumer demand."

Niemira added that the only certainty is that the broad retailing trend hasn't changed -- teen retailers and high-end stores continue to do generally well while the rest of the industry struggles.

The International Council of Shopping Centers-UBS sales tally of 71 retailers rose a better-than-expected 4.0 percent in September, about the same pace merchants have seen all year, but Niemira warned that the sales figures don't tell the whole story. The tally is based on same-store sales, or sales at stores open at least a year.

"Overall, the numbers look OK on the surface, but they mask a lot of the story line, and the story line is probably not as positive as the numbers look," he said. "It is a very mixed reading."

Richard Hastings, senior retail analyst at Bernard Sands LLC, expects that this holiday season will be the most heavily discounted since 2002 as merchants try to woo uneasy shoppers.

"We are starting to see some cooling off of the overall consumer attitude," he said.

According to a survey of about 2,100 consumers, conducted by NPD Group Inc., a market research firm in Port Washington, N.Y., shoppers plan to spend $681 this holiday season, slightly more than the $655 they spent last year.

The National Retail Federation expects total holiday spending to reach $435.3 billion. In comparison, holiday sales in 2004 rose 6.7 percent to $414.7 billion.

The Associated Press contributed to this report.

smoyers@semissourian.com

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