Originally created 11/27/98

Christmas shopping season expected to start strong

NEW YORK -- Just a few months ago, it seemed unlikely that shoppers would be ready to spend this holiday season.

The stock market was plunging, President Clinton's future was in doubt and the global economic situation looked grim.

But things have started to brighten for the nation's retailers. Consumer sentiment is on the rise and Wall Street is surging once again. That's good news this Thanksgiving weekend, the official start of the Christmas shopping season.

"It doesn't get much better than this," said Carl Steidtmann, chief retail economist for PricewaterhouseCoopers. "We have a very robust consumer environment, with good employment growth and income growth. It should be a good Christmas."

Storeowners, however, still have their doubts and won't be satisfied with such bold predictions until they see the numbers at the end of the year. In years past, strong expectations for the holidays didn't always result in blockbuster sales.

Merchants fear that any stock market volatility or unusual weather in the next month could keep shoppers home.

And people already say they won't go overboard in their holiday gift-buying this year. A new poll of 1,018 adult Americans conducted for The Associated Press by ICR of Media, Pa., showed 58 percent planned to spend about the same for the holidays as they did a year ago and 24 percent will spend less.

To get people buying this weekend, some merchants opened their doors Thursday, hoping to lure shoppers away from their Thanksgiving dinners. In Shawnee, Okla., about 50 shoppers lined up outside the Kmart store before doors opened at 8 a.m., said Gina Pierre-Louis, a store manager. Garden Ridge, a home decorating store in Oklahoma City, drew a steady crowd, too.

In Manhattan, shoppers wandered Fifth Avenue and flocked to the few stores that opened for Thanksgiving. Brookstone, which sells upscale gadgets, was filled with people buying everything from luggage to blow dryers.

"We want to wrap it up early this year," said Jeff Barry, 38, of Manhattan, who was shopping with his wife and two children. "Our goal is to do it, have it done before the day after Thanksgiving when everything else is just starting."

Even at this early date, stores are running sales offering as much as 50 percent off, hoping that shoppers don't wait until the post-Christmas sales to do their buying.

"Many retailers still worry that this won't be a very good Christmas and they are not willing to wait until that last week to see if they are right," said Britt Beemer, founder of America's Research Group, a market research group in Charleston, S.C.

Last year, 11 percent of people did their holiday shopping after Christmas, compared with the 9 percent who bought gifts during Thanksgiving weekend, according to the International Council of Shopping Centers, a New York-based trade group.

Still, this Christmas is looking a lot better than many expected. Global political and economic turmoil this summer caused Americans to pull back their spending and many feared that would last through the holidays, when some merchants do as much as 50 percent of their annual sales.

But heading into the Thanksgiving weekend, stocks are near record highs, few believe Clinton will be impeached and panic over the global economic situation has subsided.

The Conference Board, a business research group, reported Tuesday that consumer confidence in November rebounded from four consecutive months of declines.

"Consumer confidence took a dive because what was happening in the equity markets and what was going on in Washington," said Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio. "But those worries are gone. People don't think that doomsday is coming to a theater near you anytime soon."

While the outcome of the holiday season won't be known until January, there are some areas of retailing that are expected to outperform the rest.

Discounters like Wal-Mart, Kmart and Target continue to thrive. Even when overall retail sales were weak this summer, discount stores didn't flounder, attracting value-conscious people who like the convenience of one-stop shopping.

Computer and electronics retailers also are expected to have a strong year, thanks to rising demand for cheap computers, CD-ROMs and video games. Home furnishing stores will benefit from the booming housing market.

Youth-oriented retailers, like Abercrombie & Fitch, Limited Too and Old Navy, also should fare well. Unlike their cautious baby boomer parents, young people have high levels of disposable income that they are eager to spend.

Internet retailers, too, should have their best year to date, with more consumers going online and more merchants offering merchandise on the Web. According the Internet research firm Jupiter Communications, holiday sales will rise to $2.3 billion this year from $1.1 billion in 1997.

Department stores, however, continue to struggle, unable to fend off competition from discounters and specialty retailers. Already, the department stores are advertising discounts up to 40 percent off.

"Department stores will find the market to be very tough this year," said Philip H. Kowalczyk, national director of business strategy at Kurt Salmon Associates, an Atlanta-based retail consulting firm. "They are competing for consumers' pocketbooks and time and it's not easy."


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