Season of hope: Retail consultant thinks holiday sales will increase
Despite some predictions that holiday sales will drop this year, a Chicago retail consultant predicts they'll rise 1.7 percent.
That's less than last year's 2.2 percent increase or the long-term average of 4 percent, said John Melaniphy III, executive vice president of Melaniphy & Associates.
"When it comes to kids, parents are still going to get out there," he said. "The consumer is going to make sure there are presents under the trees."
Speaking to developers and municipal officials last week at an International Council of Shopping Centers program in Bloomington, Melaniphy acknowledged it's been "a tough time" for retailers, with "a lot of doom and gloom" in the air. Declining home values, record foreclosures and rising unemployment have contributed to weakness in retail sales.
But Melaniphy said he sees a silver lining in sharply lower gas prices. It was high gas prices that put a crimp in consumer spending in the first place, he said.
"I'm upbeat about holiday sales because of gas prices," Melaniphy said.
Other reasons for optimism: the $700 billion financial bailout package, another possible round of economic stimulus payments, the apparent stabilization of financial markets and public expectations for a Barack Obama administration, he said.
The National Retail Federation has projected a 2.2 percent increase in holiday sales, even though its survey of consumers indicated they plan to increase spending by only 1.9 percent. More pessimistic was a Standard & Poor's report that projected a 2.2 percent decline.
On Thursday, Wal-Mart was the only major retailer to report an increase in same-store sales in October, with a 2.4 percent rise. Target saw same-store sales drop by 4.8 percent, while Macy's, Kohls and JCPenney saw respective drops of 6.3 percent, 9 percent and 13 percent.
Lumber and hardware dealers have been particularly hard-hit, as have home entertainment stores, Melaniphy said. Plus, there's been a series of bankruptcies, including Steve & Barry's, Linens 'n Things, Bennigan's and Sharper Image.
Melaniphy said 2,831 stores closed in the first half of 2008, and the International Council of Shopping Centers projects that the number will reach 6,100 by year's end. If so, that would be the largest number of closings since 2004, he said. Some are predicting that as many as 14,000 stores could close next year, he added.
Among chains that shuttered lots of stores this year were Starbucks (600 closed), Wilson's Leather (160 closed) and Circuit City (155 closed).
But some companies are planning expansions in the greater Chicago area for this year and beyond, Melaniphy said. Wal-Mart had 20 new stores slated, and Kohls and Target had eight and seven, respectively. Macy's and Carson's each had five new stores planned. Sam's Club is expanding again after a quiet period, and J.C. Penney is having some success with its new off-mall stores, he said.
Melaniphy predicted retail sales will show "slow growth" in 2008, influenced mainly by household wealth, credit availability and job growth.
In some cases, store sizes will get smaller. One component of retail sales that won't shrink are drugstores, thanks to the aging population. But that aging population probably won't give a boost to overall retail sales, he said.
"Many consumers don't need as much stuff as the population ages," Melaniphy said. Their closets are full.
Retailers' woes have carried over to mall owners. One of the nation's largest mall owners – debt-laden, Chicago-based General Growth Properties – recently indicated it will market part of its properties in Las Vegas for sale.
"Mall owners are under intense pressure because consumers aren't going to malls as often," Melaniphy said. "They're making only nondiscretionary purchases."
Dennis Robertson, the general manager of Market Place Shopping Center in Champaign – one of more than 200 regional shopping malls owned or operated by General Growth Properties – said Market Place hasn't had many vacancies. He said there's been nothing from the company to indicate any change for Market Place.
Robertson said the mall won't break any sales records this year, but he's confident about the holiday shopping season.
"For whatever slowdown we had in October, in November and December people are going to shop," he said. "If there's one time of year they have to shop, this is it."
