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Lead Consumer confidence deciding force behind holiday sales



Analysts Predict Nationwide ‘Tough Holiday Season’

The tourist boutique Mistletoe sells Christmas-related items year round, but this year it seems the store at Seaport Village may be looking for its own holiday wish.

Sales have fallen greatly since the Sept. 11 terrorist attacks, although owner Beverly Flather is reluctant to cite specific figures.

“We’ve been significantly down in the month of September. Through Sept. 10, for the year, we were having the best year out of nine years. Commencing Sept. 11, sales have dramatically decreased, because Seaport Village relies on tourism,” she said.

Similarly, Donna Page, owner of Donna Page Boutique in La Jolla, has seen sales fall sharply, and is looking for her own infusion of holiday spirit.

“If it continues like this, it’s not going to get better, because people are scared,” she said. “But hopefully, they realize that Christmas is for the kids, and happiness and sharing.”

Many retail stores in San Diego may face what local analysts are already calling a “tough holiday season.”

The phenomenon is nationwide, and not just limited to small businesses. Last month, Nordstrom Inc. laid off 2,500 workers nationwide, said Leslie Harris, spokeswoman for the Seattle-based department store chain.

Harris did not have a regional or store-by-store breakdown, but did say the layoffs were across the board.

“It’s covered all our areas, from our full-line stores to our rack, to our corporate offices, and our credit and dot-com,” she said.

The company has not made a decision on whether it would hire additional workers to handle additional customers during the holidays. These decisions are based on in-store traffic on a week-to-week basis, Harris said.


– Stores Hiring Fewer Helpers

George Whalin, a San Marcos-based retail consultant, said what’s happening with Nordstrom is typical of what he expects at other department stores.

“I don’t think they’ve been affected any more than the others; I think they’ve just reacted to it more quickly than the others,” he said. “There’ll be minimal seasonal help hired by most of the major department stores, and others are quietly laying people off and cutting hours.”

Whalin said the effects of the Sept. 11 attacks on retail were profound and pronounced.

“September was probably the worst month in at least the last nine years, maybe 10 years. So it has had a major impact on retailing,” he said.

In recent weeks, the volume of retail business has returned almost to previous levels. However, the months leading up to Sept. 11 weren’t very strong , with the exception of a few discount sellers such as Wal-Mart and Target, retail sales were already down dramatically over the summer, Whalin said.

That means a flat Christmas.

“It looks like it’s going to be a very tough holiday season,” he said. “(Analysts) are still looking for a little bit of an increase over last year, but I don’t think we’re going to get there. If we get even with last year, I think most retailers would be quite thrilled, frankly.”


– Big-Tickets Items Take Hit

Items expected to take the biggest hit are home furnishings, consumer electronics and appliances , mostly the big-ticket items, Whalin said.

“When consumers start to worry about the state of the world and the state of things, they start getting conservative. They may be willing to go to the mall and spend a few bucks for a new pair of shoes. … They’re not very willing to go out and spend two to three thousand dollars on home furnishings or appliances,” he said.

This year, Whalin expects to see a lot of aggressive pricing, with low-interest, long-term financing on higher-ticket items.

One factor that may actually help the retail sector is that fewer people will travel for the holidays. Since they’re staying home, they’re more likely to spend money on themselves in other ways, Whalin said.

However, consumer confidence won’t return to normal until the second quarter of next year, he said.

Alan Gin, a professor of economics at the University of San Diego, said retail sales during the holiday season will be down compared to last year’s totals nationwide. However, the situation is slowly returning to normal.

For a few weeks after the Sept. 11 attacks, most Americans stayed home out of uncertainty. After the retaliatory attacks began on Afghanistan, much of that uncertain feeling disappeared, Gin said.


– Border Affected

San Diego has some specific challenges. It’s now much more difficult to cross the border, so a large number of Mexicans can no longer come into the United States to shop, while others, facing long border waits, will choose not to make the trip, Gin said.

“That’s going to impact the South Bay communities,” he said. “You’ll have a lot fewer people coming over from Mexico and buying products. While the whole region will be hurt, those retailers are going to be affected.”

One factor that won’t affect San Diego greatly is the loss in revenue from the military as it deploys in response to the terrorist attacks. Whalin is not expecting a Desert Storm-style build-up, he said.

But tourism is off sharply, as Americans are reluctant to fly, or to travel too far away from home. Even the popular Holiday Bowl college football game will draw a much smaller crowd this year, Gin predicted.

It could lead to a ripple effect, he warned.

“There’s a severe problem with confidence,” Gin said. “When people are not confident, they’re not going to go out there and borrow a lot of money and spend it to induce businesses to borrow more money to expand.”

As for Beverly Flather, the decreased sales worry her, but not too much.

“I prefer to remain the eternal optimist and believe that tourists will resume flying and visiting San Diego. So I’m reluctant to say anything but the best is going to happen until the final bell rings,” she said.

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