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4Q outlook:"Boring, conservative"

According to panelists on a major teleconference held yesterday, the back-to-school shopping season and fourth-quarter forecast for retail sales are looking anything but fashionable.

Participants included moderator Mike Green, vice president of retail in North America for Cap Gemini Ernst & Young, Jupiter Media Metrix senior analyst Ken Cassar and Wesley Wright, a former Wal-Mart senior vice president and founding partner of Diversified Retail Solutions.

The back-to-school season is second in importance only to holiday shopping for American retailers. Green states that discounters’ sales are holding flat or are slightly higher than this time last year, and specialty and department stores are down. Citing some examples in each category, sales at Kohl’s are up 4.4% and sales at Wet Seal and Sears, respectively, are down 12% and 11%.

Among those retailers bucking trends are The Sharper Image, with a sales increase of 15%, which Green attributes to school-driven electronics purchases. Sales at menswear retailer Jos A. Bank are also up 14.6%, as "A move back to more business attire in some areas of the country" is underfoot, he explains.

The United States lost approximately 118,000 jobs in August, the analysts report, and consumer confidence is at the lowest level since November 2001. These sales figures, therefore, represent consumers’ cautious move toward more lower price channels. Meanwhile, shoppers are also postponing apparel purchases, and sticking to the basics: "Specialty is no longer seen as a must-have," Green claims, saying that even the teen market has strayed from purchasing current fashions.

As a result, Wright foresees a "Boring, conservative holiday. There’s no new hot stuff out there. Things like electronic learning for little kids, though, I think will be a large category." Wright also predicts that digital cameras, basic household appliances, and books will do well in the fourth quarter. Regarding bookstore sales, Wright explains that books are not only affordable, but that consumers turn introspective in time of pending recession, and turn to books "To get a hold on their lifestyle changes — I think bookstores could have a good holiday."

The Internet has a role to play this holiday season, says Cassar. For the year, he estimates Internet sales will total $39 billion, or a 30% increase over 2001 sales; 37% of 2001 sales were transacted in November and December, and so the fourth quarter stands to be the most heavily trafficked online shopping period. Cassar says that apparel will dominate those sales, and it will hold that position until consumers grow comfortable with shopping on the Internet in other categories. "Growth online is far more influenced by the maturity of the category rather than the fundamentals of the category," Cassar puts it. Computer sales online, he adds, will begin to wane as technology is further mainstreamed.

Cassar also warns that the short holiday season may negatively affect margins. Although dot.coms like Amazon are already stretched by promotions such as its offer of free shipping for all purchases over $25, such incentives will appear stale come holiday time. By reaching beyond those limits, however, "retailers might be getting ahead of their actual capability with their promotions." In the world of bricks and mortar, Wright similarly predicts that holiday promotions will hit consumers earlier than in the past, as a result of the short shopping period between Thanksgiving and Christmas.

TAGS: Retail
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