It's beginning to look a lot like a terrible Christmas season.
Retail sales in October through December are expected to grow a meager 1.5 percent over last year, the weakest in 17 years, as shoppers pressured by a troubled economy curb spending, according to a forecast by Columbus, Ohio-based TNS Retail Forward consultants. Some Nashville-area retailers paint an equally gloomy picture.
"We're barely above water," said Tony Owen, manager of Hickory Hollow Mall's Dress Code, where sales are down 30 percent and his apparel store is almost $20,000 in debt.
In response to the sour economic headlines, retailers plan to hire fewer seasonal employees, streamline or reduce inventory and ramp up discounts.
Other shop owners and chain stores say they'll focus on a handful of must-have gifts such as electronics and educational toys or offer enticements like discounted online shipping and free-of-charge $10 gift cards mailed in bulk to lure shoppers to their aisles.
But it's likely to be an austere season. "It's going to be pretty impossible for retailers to have any positive retail sales," said Britt Beemer, chairman of Charleston, S.C.-based America's Research Group. "I think mall retail stores are going to be challenged like never before this year, and the question is how many of them will make it."
Beemer estimates that at least one in four parents will not swap gifts with each other in order to put presents under the tree for their children. That means a number of stores are betting on children's toys to get them through the season.
For instance, Wal-Mart is selling the Fisher-Price Kid-Tough Portable DVD Player, which costs about $150 on Walmart.com, betting that if parents buy any gift, they'll feel good about paying for a toy that is educational and interactive, said Glen Gabardi, Wal-Mart's vice president and regional general manager for Tennessee.
Wal-Mart, like other discount retailers, has been among the few stores that have fared well in recent months. The retail giant posted record second-quarter earnings for the three-month period ending July 31.
Apparel and specialty stores, though, are expected to see flat to no growth this season, and department stores will be especially hurt as higher-income shoppers shy away from stores, according to TNS Retail Forward's analysis.
"Unfortunately, the trends in economic conditions offer no signs of an impending recovery," said Frank Badillo, the firm's senior economist.
Many clothing and department stores are planning to reduce inventory for the Christmas season — meaning there will be fewer gifts to buy and less variety.
"Retailers are going into the holiday season with eyes wide open," said Scott Krugman, spokesman for the Washington-based National Retail Federation. "They are managing their inventories very carefully … they don't want to be left with too much to clear out" after Christmas.
The amount of cargo shipped to retailers this year is expected to fall 6 percent compared with a year ago, the National Retail Federation said.
Belk, the department store chain that has beefed up its presence in Middle Tennessee, said it would reduce the variety of colors it stocks on various items and is eliminating inventory that did not sell well last year. J.C. Penney also plans to reduce inventory.
"It's to be in line with demand, in line with the current economic environment," said Quinton Crenshaw, a J.C. Penney spokesman.
In search of $300 jeansHigher-end stores like Posh Boutique are hoping a smaller but more exclusive inventory will still attract wealthier consumers.
Terrah Hamilton, buyer and district manager for Posh Boutique, said she has become pickier, reducing overall inventory but adding 10 to 15 brands that aren't sold at neighboring competitors. For example, she has added jeans from Swedish companies Nudie Jeans Co. and Acne Jeans, which retail for $200 to $300 a pair.
Lauralee Robey, 20, said uniqueness is a selling point for her. Robey, who lives downtown and works at the Hill Center at Green Hills, said she once spent $80 on a unique bracelet for a friend's birthday. She said the economy hasn't affected her plans for Christmas shopping this year. "It's memorable," Robey said.
Smaller staffs plannedRetailers plan to hire fewer seasonal employees this fall and winter, though, in an effort to trim costs. Wholesale and retail hiring intentions were at the lowest levels since 1991, according to a recent survey by Milwaukee-based Manpower Inc. in which 13 percent of retail and wholesale companies said they'd reduce hiring between October and December.
J.C. Penney in CoolSprings Galleria will hire 10 fewer employees this Christmas season, a 17 percent decrease from last year, store manager Denise Mann said.
Shoppers can also expect a more intense, competitive marketing push because there are five fewer shopping days between Thanksgiving and Christmas this year, said analyst Betty Chen of Wedbush Morgan Securities in San Francisco.
"I think the concern is, 'How do you maximize those days as much as possible?' " Chen said.
One idea is to lure customers in with free gift cards. At MacAuthority, an electronics store that sells Apple computers and iPods, the company plans to mail gift cards of at least $10 in value to entice customers to come in and buy Apple products, said Mark Gregory, the company's CEO and president.
Other analysts say major chains are likely to soften their marketing messages to better appeal to increasingly fragile consumers, who not only are grappling with shrinking 401(k) accounts and diminished home values but also may be losing faith in the U.S. financial system in the wake of the upheaval on Wall Street.
"This is like watching a car crash, but the two vehicles haven't hit yet," said Marian Salzman, chief marketing officer for public relations agency Porter Novelli. "Consumers are going to be paralyzed through Christmas."
Advertising gurus say that stores need to tweak their sales messages to be more sensitive to uneasy consumers, similar to what many did after the Sept. 11, 2001, terrorist attacks.
"We are facing a difficult time, and retailers need to be conscious of that and be very flexible," said Richard Kirshenbaum, a founder of advertising company Kirshenbaum Bond & Partners. Merchants should reconsider any "highly confident and optimistic tone," he said.
Instead of trying to sell a dress, clothing stores should sell the attitude, style and confidence consumers get from the product, said Peter Arnell, chairman and chief creative officer of The Arnell Group, a subsidiary of Omnicom. Stores "need to give them trust and encouragement," he said.
That may be particularly true if consumers grow even more worried.
Deloitte Research predicts total holiday sales, measured November through January and excluding motor vehicles and gasoline, will rise 2.5 percent to 3 percent over the year-ago period. A rise of 2.5 percent to 2.8 percent in the November through January period would be the smallest gain since 1991, Deloitte noted.
Online sales to dipRetail Forward said online sales growth could reach 9 percent this holiday season, but even that seems weaker compared with the 19 percent growth turned in last year for the category.
"These shoppers who are more likely to shop online have turned increasingly value-focused in recent months as they have felt worse off with regard to investments, home values and other economic measures," Badillo of Retail Forward said.
Some online retailers hope to attract shoppers with low shipping fees. Harry & David is sweetening the deal for online and catalog shoppers by giving as much as a 35 percent shipping discount on some orders in hopes that consumers buy their well-known gift baskets with fruit at a higher volume, said Bill Ihle, the company's executive vice president.
Re-Re Mayfield, an avid shoe shopper strolling past stores in the Hill Center at Green Hills one day last week, said she'd spend $200 on shoes for herself this Christmas. Last year, she spent $1,200 on shoes for her entire family.
"The gas prices are so high, I can't afford to buy my shoes," Mayfield said, adding that her favorite pair of shoes are her $275 Kenneth Cole sandals. She recently bought knockoff shoes in order to save money.
Melissa Brown, 39, of Franklin, plans to spend $2,000 on gifts for her four kids, down about $1,000 from her spending level in 2007. And instead of giving presents to extended family members, she's considering going on a vacation with them in order to save cash.
"There is not enough money," said Brown, an account executive. "Groceries cost way too much."
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