Originally created 09/22/05

Retail sales suffer



NEW YORK - Since mid-July, new fall fashions such as shrunken brown velvet jackets and Victorian-style blouses have been gathering dust on racks at the nation's retailers.

It's now almost the end of September, and for many merchants a combination of hot weather, subdued fashions in dark colors, high gasoline prices, and the ripple effects of Hurricane Katrina have made shoppers stay away from clothing stores.

If sales don't pick up soon, retailers will be forced to cancel some future fall orders, fueling more concern about consumer spending for the holiday season.

"I am still in flip-flops. I am just not there mentally," said Lina Allocca, of Madison, N.J., who hasn't been to a mall in more than a month. When she does return to the mall, she will be more frugal given all the economic uncertainty.

"I don't want to make any impulse buys," she said. "I don't want to do anything to put me over the top just because it is cute and trendy."

Her concerns are echoed in a new AP-Ipsos poll that says consumers are worried about rising food and gasoline prices.

None of this bodes well for spending, which has been one of the engines driving the nation's economy.

"I am worried that without some positive offset, what we will have is a continuation of an uneven performance by the retailers, one that is trending lower and lower," said Michael P. Niemira, the chief economist at the International Council of Shopping Centers.

On Tuesday, he pared his September sales forecast to a 3.0 percent gain, from 3.5 percent, after a sharp decline last week from the week before.

His estimate is based on sales at stores opened at least a year, known as same-store sales, which are considered a good indicator of a retailer's health.

Mr. Niemira is concerned that the weakness is becoming broad-based.

"Business has turned really sluggish. There is a lack of traffic in the stores," said Roseanne Cumella, the senior vice president of merchandising at the Doneger Group, a New York-based retail consultancy that advises major stores on what fashions to buy.

Ms. Cumella said that except for upscale stores, her clients, which include discounters and department stores, have struggled with a low single sales drop this month compared with a year ago.

Amid such worries, two retail forecasts predicted slower growth in holiday sales from last year.

The National Retail Federation projected holiday sales, which encompass November and December, to increase 5 percent, less than the 6.7 percent gain in 2004.

Ernst & Young LLP estimated that total holiday retail sales will rise between 6 percent and 7 percent, compared with last year's 8.3 percent increase.

The good news for consumers will be that the nation's retailers are expected to be more aggressive about discounting from the start of the holiday season. They had better be very generous for shoppers such as Ms. Allocca.

"I am looking for more than 40 percent off," the 35-year-old said.