Retailers Sing The Blues Weak Sales Spell Trouble For Merchants Nationwide

The 1995 Christmas shopping season is turning out to be a big disappointment for the nation’s retailers, even with a full weekend to go before the big day.

“The season’s a bust,” summed up Thomas J. Tashjian, an analyst with Montgomery Securities Inc. in San Francisco. “It’s not just weather. It’s an indicator about consumer purchasing and we have to face that issue beyond the holiday season.”

Another analyst, Steven Kernkraut of Bear, Stearns & Co., was equally blunt. “I would call it horrible,” he said.

Kernkraut said all segments of the industry, including department stores, discounters and specialty stores, were suffering. However, Sears, Roebuck and Co., and retailers serving the very top end of the market, were expected to do well.

Overall retail sales have been listless all season long. Snowstorms in the East on Tuesday and Wednesday were another drag on business, although store owners were still hoping to recapture some business during the final big weekend.

Many companies were in the same situation as J.C. Penney Co. Inc.

“It looks like it’s going to be flat,” said spokesman Duncan Muir. He said Penney’s business was affected by the snow, but that even a strong weekend will leave the company with an unremarkable season.

What went wrong for retailers? A confluence of several factors, all of which have been developing for some time and which shouldn’t have taken store owners by surprise:

There are too many stores chasing after a shrinking pool of consumer dollars. Retailers have kept on opening stores, ignoring the fact that baby boomers, the people who spent big in the 1980s, have been saving instead of splurging in the ‘90s.

Few retailers have been willing to bite the bullet and shut stores unless they’re on the verge or actually in bankruptcy proceedings.

Retailers have been slow to respond to consumers’ changing tastes, with more people spending on homes, computers and electronics than on clothing.

Consumers grow increasingly savvy. They know what they want to spend on a particular item, and they know they can force retailers to cut prices if they wait long enough to shop.

Catalog merchants faced similar problems this season. L.L. Bean Inc. has said its business, while up from last year, fell short of projections.

“Their business is probably less than they expected,” Steve Ashley, an analyst with Cleary Gull Reiland & McDevitt Inc. in Milwaukee, said of the mail-order companies.

Consumers concerned about high debt levels may have been shy about using credit cards, the primary medium of exchange in the catalog business, he said. And he noted that catalogs, which don’t have the same pricing flexibility as other retailers, were hurt by the deep discounting at many stores.

“That’s going to pull sales away from catalogs,” Ashley said.

Stores nervous about slow sales slashed prices deeply this season. Many retailers were also forced to mark down because they had competition from going-out-of-business sales at stores operated by Jamesway, Merry-Go-Round and other retailers that are in bankruptcy proceedings or otherwise scaling back.

While hopes are pinned on this weekend, retailers are also looking to the after-Christmas sales for more business. But that will not turn the season around.

The disappointing outcome to Christmas 1995 came as little surprise after retailers struggled for sales during the fall. And analysts believe 1996 will be a year of retrenchment for the industry.

“We estimate about 2,000 conventional discount stores should close between 1995 and 1999,” analyst Tashjian said.