Markets Leave Retailers Nervous About Christmas

Wall Street may be the Grinch that steals Christmas from the nation’s retailers.

The stock market’s recent wild gyrations are spooking some store owners, who fear that consumers will watch their holiday spending if the market’s volatility continues through the end of the year.

That could depress sales for retailers during the important holiday shopping season, when many stores do the bulk of their annual business.

“Suddenly consumers have realized that the stock market is not a one-way street, going up only,” said Kurt Barnard, a retail consultant and president of Barnard’s Retail Trend Report. “That may make them a little less inclined to open their wallets.”

Income grew in September - a seasonally adjusted 0.4 percent - but not as fast as in August, when it rose 0.6 percent, the Commerce Department said Monday.

Consumer spending moderated as well. It inched 0.2 percent higher in September after a 0.3 percent rise in August and a 1.1 percent spurt in July.

It was a soft end to a robust quarter and would have been a harbinger of spending restraint even without the stock market shock, economists said.

Though not in the latest two months reported, income growth generally has lagged spending, and that means consumers have raided their savings.

“Consumer spending will be increasing … but not at the rapid pace we had seen,” said economist Lynn Reaser of Barnett Banks Inc. in Jacksonville, Fla. “It will be a good Christmas but not a spectacular one.”

Everyone knows the risk of playing the stock market, but the dramatic rise in U.S. equities - a doubling of the Dow since early 1995 - left many investors confident that the raging bull couldn’t be slowed.

That was until last week, when Wall Street faced its bumpiest ride in a decade. The Dow Jones industrial average plunged a record 554 points Monday and then bounced back with a 337-point gain on Tuesday. The world’s best-known stock barometer ended the tumultuous week with a 273-point decline and a warning from stock analysts that the volatility may not be over.

“The fluctuations, its ups and downs, people feel their security is jeopardized,” said Beverly Jorstad, while shopping in downtown Milwaukee over the weekend.

For retailers, such fluctuations aren’t reassuring. Already store owners worry of a lackluster selling season, coming on the heels of a less-than-stellar year for retail sales.

Also weighing on retailers’ minds is the moderation in the growth in American’s personal incomes and the skyrocketing amount of consumer debt, much of it on credit cards.

“The stock market’s fluctuations have given everyone a reason to pause,” said Tracy Mullin, president of the National Retail Federation, a Washington-based trade group. “If consumer confidence takes a hit, it could have some kind of impact.”

At Oakland Mall in Troy, Mich., Gene Pannaralla, a store manager at Meyer Treasure Chest jewelers, sees some concern among shoppers about the direction of the stock market.

“People are buying a little bit more conservatively,” he said. “They haven’t mentioned the stock market per se, but I think they’ve got it stuck in the back of their head.”

Shirley Gagne, who works at Estee Lauder in Hudson’s at the Oakland Mall, also thinks holiday sales will be hurt by the ups and downs on Wall Street.

“People get cautious,” she said. “For the little investor, it’s a red flag.”

Among those most likely to see sales slide as a result of the stock market are upscale stores, like Saks Fifth Avenue, Neiman Marcus and Tiffany & Co. Catering to the upper class, these merchants have thrived in recent years as consumers made big money on the market.

“Retailers who depend on upperincome customers must be panicked,” said Sandra Shaber, senior vice president at WEFA, a consulting firm. “There’s a real question mark out there over whether people will buy high-end merchandise this year.”

But before ruling the season a washout, many retailers will be watching where the stock market turns in the eight weeks before Christmas.