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Archive for Sunday, November 24, 2002

Retail expectations a mixed bag for holidays

Consumers may be wary of credit-card debt

November 24, 2002

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Retailers and economists are predicting holiday shoppers in the Lawrence area will spend about as much as they did last year, but the wild card in their predictions may be the credit card.

Kansas University economist Luke Middleton said he anticipated retail sales totals in the Lawrence area to be on par with totals from last year, but he said there was one major question looming that could push sales totals downward.

Are shoppers, now in the second year of an economic downturn, still comfortable saying, "Charge it"?

With some layoffs hitting the area, a stock market that Middleton describes as "not a happy place," and little to no salary increase for Lawrence's thousands of state employees, families may have to rely more on credit-card spending this year than usual.

"If people have already been incurring debt this past year, it may be to the point that by December they're saying enough is enough," Middleton said. "A lot of families go into debt for the holidays on a routine basis, but what may be different this year is they see this debt as a continuation of a pattern that began months ago."

Middleton is guessing that enough people will continue to keep their credit cards busy during the holiday season to give area retailers at least a moderately merry Christmas.

"I don't think the expectation is that it will be a bum holiday season," Middleton said. "It will probably be about the same as last year. I'm not predicting it to be a disappointment for retailers or anything tremendously negative. If it goes down, it will be by a small amount."

So far, so good

Several Lawrence retailers seem to agree with that assessment, mainly because they've already started to see holiday shoppers.

"Our expectations are high," said Steve Wyss, store manager at Lawrence's J.C. Penney. "Certainly there are some concerns with the economy, but consumers have shown to be very resilient up to this point.

"Our sales are currently in the plus column (compared to last year), and when Christmas is over, I think we'll still be in the plus column."

Linda Lester, owner of The Etc. Shop, said she was optimistic that this year's sales would reach last year's total or slightly exceed them because shoppers aren't waiting until Thanksgiving, which comes late this year, to begin their gift buying.

"Last weekend we were very busy," Lester said. "It caught me off guard that we were so busy. Even with the economy, it still seems that if people find something they like, they're still going to buy. And we're very thankful for that."

Brett Schubert, store team leader at SuperTarget, isn't so sure consumers will be as free-spending with their money as in years past.

"I think it will be a bit of a flat year," Schubert said. "I'm expecting a lot of the businesses out there will see decreases, but I think some of the department stores will feel a bigger hit than stores like us because shoppers are trying to stretch their dollars further."

Joe Flannery, president of Weaver's Department Store, said he was not bracing for a drop-off.

"Up to this point, sales have been OK this year," Flannery said. "I think anybody who has any type of retirement plan has been affected by the stock market and it is absolutely on their mind, but we've been pleased with November sales.

"People still love Christmas."

State slowdown

But according to state sales tax numbers, 2002 hasn't been a banner year for Lawrence retailers thus far. From July, the beginning of the state's fiscal year, through October, sales tax collections are up by 1 percent. That's a poorer showing than several area cities, including Topeka, which is up by 4.6 percent; Overland Park, up by 4.8 percent, and Olathe, up by 4.6 percent.

One of the few major cities in the state with a slower rate of sales tax growth is another university town, Manhattan. Its sales tax collections have grown by 0.7 percent through October.

Statewide, retail sales for the first half of 2002 are down compared to the first six months of 2001, said Janet Harrah, director of the Center for Economic Development and Business Research at Wichita State University.

She thinks that might be a sign of things to come for retailers across the state.

"This year in Kansas we expect holiday sales to be rather lackluster compared to last year," Harrah said. "Primarily consumer confidence is down, and it's down for a variety of reasons. There's layoffs, and there's the rising unemployment rate."

In Lawrence, the problem may be more of a lack of income growth for the roughly 15,000 people who are employed by state or local governments, Middleton said.

"Salaries for state employees have not really gone up, but the cost of living has, so they're going to have a little less to spend," Middleton said.

He also said state employees might be even more pessimistic about the outlook for their finances than members of the private sector.

"Where I feel the difference is, in the private sector the attitude is this is just a slump in the economy," Middleton said. "With the state's finances, people feel the problems are much deeper. There is a real problem with the state's financial system. The state's problems may endure a little longer."

Looking for deals

Opinions are mixed on whether retailers will feel the need to do abnormally deep discounting of prices to bring consumers in the door.

"I think we're going to see a lot of motivated retailers," Harrah said. "As a consequence, it is going to be a good year for consumers. You are going to find a lot of deals. If you have the money to spend, you're going to find that it goes a long way this year."

Middleton is not so sure. He thinks retailers believe they overreacted to concerns last year that shoppers were going to stay home after the terrorist attacks.

"I think last year they got burnt by lowering them more than they had to," Middleton said. "Plus, I don't think a lot of retailers can afford to do much discounting this year."

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