Retailers harboring guarded hope for holiday sales

With the holiday shopping season kickoff a week away, retailers nationwide were looking for any positive sign in the Commerce Department’s October retail sales report, which was released Nov. 15.

They got some when the report indicated retail sales rose 1.4 percent, signaling that consumers might be trending toward loosening their purse strings during the ultra-important holiday time frame.

Wall Street investors reacted positively to the news, sending the Dow Jones industrial average up 136 points Monday. Analysts nationwide, however, cautioned retailers not to read too much into the report.

The 1.4 percent rise compared purchases only to September sales, which fell 2.3 percent compared to August, and much of the increase during October was attributed to a 7.4 percent jump in automobile sales.

Excluding autos, sales rose just 0.2 percent during October.

Building materials and garden equipment retailers were hit hardest during the month, as sales dropped 2.4 percent. Furniture stores, electronics dealers and sporting goods registered a slight decline. Bars and restaurants registered a 1 percent up-tick, while grocery and convenience sales rose slightly.

“Given the 3.4 percent decline in after-tax income during the third quarter and the decline in consumer sentiment during September, it is unlikely consumers will be spending freely during the holidays,” said local economist Tucker Hart Adams, president of the Adams Group Inc.  “Spending increased during the third quarter, up 3.4 percent, despite the income decline, which meant the saving rate dropped substantially, another reason to expect, now that Cash for Clunkers is finished, that consumers will cut back on spending and begin once more rebuilding savings.”

Consumer spending accounts for 70 percent of U.S. economic activity and the National Retail Federation contends that 25 percent to 40 percent of many retailers’ annual sales occur during the holidays. During 2008, holiday sales represented 18.5 percent of total retail industry sales. Robust consumer spending this holiday season could indicate a recovery is under way.

Still, unemployment nationwide is at a 26-year high (10.2 percent) and businesses are facing a tight credit market, which foils any type of expansion plans, even in Colorado, which has seen unemployment drop during each of the past two months.

“The fall in the unemployment rate in Colorado has almost been because people have dropped out of the labor force, not because they’ve found work,” Adams said. “There is no reason to think anything in Colorado Springs will be different from what is going on statewide or nationally.”

Merchants assist food drive

Beginning this week and lasting through Christmas Day, members of the Old Colorado City Association and local Safeway stores will partner with the Springs Rescue Mission to provide food and clothing for needy families.

In an effort labeled the “10 for 10 campaign,” participating businesses will place collection bins in their establishments.

People who wish to participate can purchase and donate non-perishable food to the Springs Rescue Mission or donate $10 to the mission directly. Money will be used to purchase food at steep discounts.

Springs Rescue Mission also will host a Thanksgiving banquet Nov. 25 and a Christmas dinner Dec. 24 at City Auditorium for needy families.

To donate perishable items such as turkeys or meats, contact the Springs Rescue Mission at www.springsrescuemission.org.

Waldenbooks close nationwide

Citing a strategy to right-size its Waldenbooks retail segment, Borders Group plans to close more than half its Waldenbooks stores nationwide by early January.

Housed primarily in shopping malls, 200 of the 330 Waldenbooks stores are scheduled for the chopping block.

The company was careful to say that none of its Borders stores or Day By Day mall kiosk operations would be included among the store closings.

Borders Group operates Borders stores at Broadmoor Towne Center and Chapel Hills Mall.

Borders Group Chief Executive Officer Ron Marshall said the company believes opportunity remains for Waldenbooks to operate on a much smaller scale and complement its Borders superstore business.

The book retailer plans to reduce the number of Waldenbook stores operating at a loss, reduce its overall rent expense and generate cash flow through sales and working capital reductions. Stores that remain open will be integrated into the Borders superstore computer system, an investment Borders Group is making to merge all stores to a single platform.

The store closings will result in the elimination of 1,500 mostly part-time jobs.

This latest round of cuts comes after Borders Group shuttered 112 Waldenbooks stores during 2008 and an average of 66 stores per year between 2001 and 2007. Waldenbooks at The Citadel mall closed its doors during January 2006.

Scott Prater covers retail for the Colorado Springs Business Journal.