Holidays Look Less Merry to Retailers

Each year, the retail sector counts on big holiday sales to beef up its bottom line. The way things look now, retailers and retail property owners, developers and advisors are more likely to find lumps of coal in their stockings this year than candy and presents. According to the National Retail Federation’s annual estimate published on Sept. 23, holiday sales will creep up only 2.2 percent this year–only half of the 4.4 percent gain that the retail sector has averaged over the past decade. To put that in perspective, a gain of 2.2 percent would be the smallest year-over-year increase posted by retailers since 2002, when the economy was struggling to recover from the previous year’s terrorist attacks. The federation’s report is only the latest that confirms the impression that rising prices and turmoil in the financial markets are sapping consumer confidence. “We expect consumers to be frugal this season and less willing to splurge on discretionary items,” said federation chief economist Rosalind Wells in a statement released with the report. One troubled national retailer scrambling to make the most of the holiday shopping season is Circuit City Stores Inc. In its quarterly report, which was released on Monday, the electronics chain cited plans to implement steps intended to pull in more customers and spark big holiday sales. A strong selling season would help the company get back on its feet. The chain reported a $162.7 million operating loss in the last quarter–better than indicated in the company’s guidance but bad enough to prompt the departure last week of CEO Phillip Schnoover. The report also highlights the uncertainty surrounding the chain’s real estate portfolio. Circuit City’s continuing difficulties have long led to speculation about a possible buyout that would presumably close or repurpose a good number of the company’s 716 stores. Nevertheless, Circuit City also maintains that it will follow through on its current expansion plans. The latest quarterly report states that the chain aims to open 38 to 45 new stores and relocate seven to 10 others during fiscal year 2009.