Retailers tickled over sales

NEW YORK – A warning to procrastinators: Better shop early if you want the must-have holiday gifts.

Already, toy sellers such as Wal-Mart Stores Inc., Toys R Us Inc. and KB Toys Inc. are scrambling to get their hands on more hot toys, particularly T.M.X. Elmo from Mattel Inc.’s Fisher-Price, whose better-than-expected sales are making it increasingly likely that it will be the must-have toy for the season.

In yet another encouraging sign of consumers’ willingness to spend, Scott McCall, chief toy officer at Wal-Mart, noted that high-priced toys such as $249 red Mustangs under Mattel’s Powerwheels brand are selling fast early in the season, something that he hasn’t seen in five years.

And Michael Gould, chairman and CEO of Federated Department Store Inc.’s Bloomingdale’s, reported strong sales of fall merchandise in September, which could only bode well for holiday apparel.

“There is no question that business is better. It has been a strong September,” Gould said. “Apparel business has been good, the shoe business has been outstanding. There is a better feel out there.”

Such encouraging signs are helping to lift the spirits of many retailers, who only this summer planned for modest gains in holiday inventory as they worried about how soaring gasoline prices and rising interest rates would curtail gift-buying. In recent weeks, falling gasoline prices, receding mortgage rates and a rebounding stock market have helped to perk up consumer demand and ease merchants’ worries about the holiday season.

Stores are expected to report a strong same-store sales gain of about 4 percent for September on Thursday, according to Michael P. Niemira, chief economist at The International Council of Shopping Centers. That’s higher than Niemira’s original 3 percent forecast. Same-store sales are sales at stores that have been open at least a year. One exception will be Wal-Mart, which estimated on Saturday that same-store sales were up a disappointing 1.8 percent in September from the year-ago period, when it benefited from a spending spree tied to preparing for and recovering from the hurricanes.

Still, merchants are being cautious as they adjust some holiday orders, so consumers won’t see the same level of generous deals as they did a year ago and procrastinators won’t find the goods they want.

“Yes, (stores) may be adjusting to possible gains,” said Dan Butler, vice president of retail operations at the National Retail Federation. “But they are not going overboard. Gas prices could always go back up.”

And other big challenges still remain. One big worry is the deteriorating housing market. In the last few years, a booming housing market and record-low interest rates spurred spending as consumers tapped into their rising home equity. Still, the recent pause in interest rate hikes by the Federal Reserve should offer some relief to shoppers.

Meanwhile, the New York-based Conference Board last week reported a rebound in consumer confidence in September, but the survey showed consumers’ lingering concerns about the job market. Employment showed modest gains in August, with wages barely up, according to the latest job report.

For the holiday season, The National Retail Federation forecasts a healthy 5 percent gain in total sales for the November-December period. That’s higher than the 4.6 percent average over the last decade, though less than the 6.1 percent from the year-ago period. Scott Krugman, a spokesman at NRF, said falling gasoline prices were reflected somewhat in the forecast, but he cautioned not to make too much of the trend since it could be only temporary.

Amid some lingering uncertainty, one challenge for stores is to keep profits high without jeopardizing sales. Selling out of products is good for profits, but stores’ goal is to sell out of goods close to Christmas Day, not earlier, which would hurt revenues, according to Madison Riley, a strategist at Kurt Salmon Associates, a consulting firm. He estimates that holiday inventories are up anywhere from 3 percent to 5 percent.

But general inventories don’t help if stores have sold out of the popular holiday toys.

Children don’t want a substitute for a hot toy. That’s why toy sellers are scrambling to get their hands on T.M.X. Elmo and other hot items that are beating sales projections. The good news is that goods are flowing smoothly through U.S. ports, including the West Coast ports, according to Craig Sherman, NRF’s vice president of government affairs.

Jim Silver, editor-in-chief of Toy Wishes, a trade publication, estimates that Fisher-Price made about 700,000 T.M.X. Elmo units, and the company is scrambling to make more. Fisher-Price officials declined to comment. Other toys that may be in short supply are Speed Stacks, from Jakks-Pacific Inc., and Hasbro Inc.’s Butterscotch, a $299 life-size robotic pony, Silver noted.