Retailers brace for gloomy holiday season

During a staff meeting at Altschul’s two weeks ago, Bob Cooper asked his employees about their expectations for the holiday season.

Only one employee – a top saleswoman who “can sell ice to an Eskimo,” as Cooper described her – answered with optimism and predicted a good Christmas. Even her boss finds it difficult to share her sentiments.

“I think it’s going to be rough,” said Cooper, president of the men’s and women’s clothing and accessories store off Military Highway in Norfolk. “I’ve been in the retail game since ’71, and it’s the worst I’ve seen it. We’ve got so many things going against us.”

Retailers are normally upbeat when it comes to the winter holidays, when the bonanza of gift-buying brings an influx of cash to carry them through the rest of the year. They tend to put their most festive faces forward, fearing negativity will dampen customers’ moods and willingness to spend.

This year, though, no one can deny the pall that hangs over the retail industry, even as its members put up spark­ling Christmas trees and hang glittery garland. The National Retail Federation’s survey released in mid-October showed consumer spending inching up just 1.9 percent from last year. The International Council of Shopping Centers forecast a similar 1.7 percent increase in sales for most chain stores in November and December this year.

Many merchants, locally and nationally, have ordered less holiday inventory with the expectation of slower sales or because reduced revenue and tight credit have left them short on cash to pay for goods. They have coupled that conservatism with aggressive discounting and promotions, taking drastic measures to move merchandise.

“If it were just the holiday season, they could probably survive it,” said Susan Milhoan, president and chief executive of Retail Alliance, the trade group for the region’s merchants. “But it’s the culmination of months of reduced expenditures by consumers.”

Cooper cut holiday orders at Altschul’s by $100,000 this year, he said. The smaller manufacturers that tend to supply independent merchants keep open lines of inventory, he said, so he has set some money aside and can replenish stock on short notice if he runs low.

“I bought less this year,” said Diane Wand, owner of The Velveteen Rabbit, a children’s shop on Western Branch Boulevard in Chesapeake. “I’m doing a lot of special orders, trying to keep less stuff on the floor.”

Ann Pavilack, owner of The Globe gift shop at the Oceanfront in Virginia Beach, said she cut quantities of certain items, ordering plenty of the more-popular white and off-white blankets but fewer colors. She also shifted her mix to more lower-priced items, such as European soaps that shoppers could pick up for a hostess or teacher gift.

“That’s more affordable than, like, handblown glass,” she said.

Local retailers have told Milhoan that more rigorous lending requirements from banks have made it difficult to get credit to buy inventory.

“A lot of them aren’t buying the trendy stuff,” she said. “They’re buying the staples. They’re buying the things they know are going to move.”

Most national chains plan their inventory six months to a year before the holidays, said Jim Peko, who specializes in restructuring retail businesses for accounting firm Grant Thornton LLP and is based in New York. Some manufacturers have tightened their terms for retailers, cutting the time frame to pay off the merchandise, which forces those short on cash to reduce their orders.

Those retailers will have to push harder to boost sales and generate revenue, Peko said.

“You’ll begin to see early promotions,” he predicted.

Most retailers will launch their heaviest promotions the day after Thanksgiving, known as Black Friday, the widely accepted start of the holiday shopping season when balance sheets typically end up in the “black” and show positive cash flow.

Target and Kohl’s have mentioned aggressive markdowns and frequent sales early in the season. In its big holiday Toy Book catalog, which came out in October, Toys R Us increased the number of pages and the amount of storewide discounts to $5,000 from $3,500 in the book last year, said Bob Friedland, a spokesman for the retailer.

Closer to home, local merchants said they’re trying promotional activities they’ve never done before – or needed to do – during the holiday season. Honey Tree Children’s Boutique, at Town Center in Virginia Beach, set up a “Money Tree” and lets customers pick for a discount of 20, 30 or 50 percent off their purchase.

The Velveteen Rabbit has scheduled its first-ever holiday-season promotional event, Wand said. She and Rose Fullmer, the owner of Honey Tree, also have added sale racks with goods marked down 70 percent – the lowest they have ever gone – in addition to those 50 percent off.

“It’s time to move this stuff out,” Fullmer said. “Come on, people.”

MacArthur Center expanded its Black Friday promotions this year, looking for “things that might draw people to the mall,” said Karen Winters, marketing director for the downtown Norfolk shopping center. The center plans to give away 14 Nintendo Wii video game systems with a drawing every hour starting at 9 a.m.

“If you walk through the mall, you’ll also see that the stores are more promotional,” Winters said. “It’s all done to drive more sales.”

In past years, holiday promotions rode waves, with Black Friday and the last weekend before Christmas as “bookends” for the strongest deals, said Adrienne Tennant, a retail analyst based in Arlington and head of the consumer research group for investment firm Friedman, Billings, Ramsey Group . In between, particularly on weekdays, retailers would pull the goods back to full price, then maybe mark them down to a lesser extent on the interim weekends.

This year, Tennant said, she expects stores to get out in front with their promotions and sustain them through the season. They want to grab shoppers early and move that merchandise in case gas prices climb again and spending slips further.

“That’s the environment we’re in,” she said. Stores “need to keep the product moving” while they can, “because there is uncertainty about when the next leg down is going to be.”

At Altschul’s, sales have fallen by double-digit percentages from last year, Cooper said. He took over the store in 1996, when it occupied a downtown Granby Street space less than a third of its current size. The old showroom expanded three times in a decade before Cooper ran out of room and relocated to Military Highway in 2006.

“We thought we had tremendous opportunities for growth,” he said last week. “Everything was great, and then the economy started to go down.”

Cooper now wishes he had the lower overhead of the smaller store – he has few ways to cut expenses without hurting employees or customer service. Altschul’s had 20 workers at the time of the move and has 14 now, with most of the loss through attrition, he said.

“We’re going to do everything we can to survive,” Cooper said, noting that the 110-year-old retailer weathered the Great Depression. “I don’t want to lose it on my watch.”

Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com