TBO.com - TBO is Tampa Bay Online

Consumer Spending Pullback To Weaken Retailers' Reports

ADVERTISEMENT

The Associated Press

Published: January 10, 2008

NEW YORK - The nation's major retailers are slated to report tepid sales gains for December today, likely making the holiday shopping season the weakest since 2002.

The size of the pullback in consumer spending could inflame recession fears that have grown during a recent batch of negative economic reports.

Consumers, faced with higher gas and food prices, a slumping housing market and an escalating credit crisis, have been cutting back on spending during the past year. Recent news of $100-a-barrel oil, a weakening job market and a mortgage sector in distress are making economists more worried about consumers' financial health.

"I am very pessimistic about the outlook for consumer spending," said Carl Steidtmann, chief economist at Deloitte Research, who forecasts declines in same-store sales in coming months. "There is a strong host of headwinds that consumers are facing."

Same-store sales are sales at stores opened at least a year and are considered a key indicator of a retailer's health.

According to the International Council of Shopping Centers-UBS tally, same-store sales are expected to be up no more than 1 percent for December, reduced from a 1.5 percent projection. That would mean that the holiday shopping period, spanning November and December, will be up a modest 2.25 percent, according to Michael P. Niemira, chief economist at ICSC.

If December's sales fall below the 1 percent gain, that would make the 2007 holiday shopping season the weakest since 2002 when the holiday period was up a meager 0.5 percent.

Job Market Could Derail Pace

According to the ICSC-UBS tally, same-store sales growth has averaged 2.4 percent so far this fiscal year, compared with 3.6 percent for the entire fiscal 2006. Retailers' fiscal year ends in late January.

"This holiday season, consumers were even more bargain-oriented," said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass.

Perkins noted the slowdown in spending has been broad-based, and he and others fear that a further deterioration in the job market could derail the pace even more.

On Friday, the job report from the Labor Department showed that hiring practically stalled in December, driving the nation's unemployment rate up to a two-year high of 5 percent.

Meanwhile, the Washington-based American Bankers Association reported Jan. 3 that late payments on a cluster of consumer loans, including those for autos, home improvement and certain home equity loans, rose in the summer to their highest level since the country's last recession in 2001.

On Wednesday, Countrywide Financial Corp., the nation's largest mortgage lender, said the delinquency and foreclosure rate of mortgages in its portfolio skyrocketed in December, sending off alarms of a worsening mortgage crisis.

During the past week or so, reports of weak sales from various merchants have been trickling in confirming how such economic woes are affecting consumer spending.

Apparel Chains To Be Hardest Hit

Last week, CVS Caremark Corp. and other drugstore chains released weak sales reports for December.

Bed, Bath & Beyond Inc., typically among the better performers in the home furnishings sector, delivered a weak third-quarter earnings report and fourth-quarter forecast.

Analysts say that discounters should fare best since shoppers are trading down to less expensive stores. Wal-Mart Stores Inc., the world's largest retailer, has maintained that it will meet its goal of same-store sales growth for December of 1 percent to 3 percent.

The hardest hit will be apparel chains, which have languished because of the slowing economy and lack of compelling fashions. The popularity of gadgets such as iPods and flat-panel TVs have also siphoned away sales from apparel sellers, according to Gilbert Harrison, chairman of Financo Inc., a New York-based investment banking firm specializing in retailing. In the end, Harrison says that retailers that have "the most interesting, innovative offerings" are going to win.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT