Worried consumers not ready to spend yet

  • Thursday, November 8, 2001 9:00pm
  • Business

Associated Press

NEW YORK — Even with the arrival of Halloween and big store discounts, consumers stayed away from the nation’s malls in October, worried about the economy and their own safety amid anthrax scares and heightened terrorist alerts.

As the nation’s top merchants reported generally disappointing sales results Thursday, it was clear that discounters and other value-oriented stores remain the beneficiaries of consumer frugality. Mall-based department stores and apparel chains continued to languish.

The news, while not surprising, was painful for retailers looking for signs of a consumer spending rebound in time for the holiday season. Consumers cut back sharply after the Sept. 11 attacks on the Pentagon and World Trade Center, and haven’t fully returned to their previous spending levels — which were already depressed because of the economy.

Sales of Halloween items, usually a big boost for late October business, was below expectations at many stores, including Kmart Corp., according to Jeff Feiner, managing director of Lehman Brothers.

Communities and malls scaled back trick-or-treating events for security reasons. Consequently, mall traffic tumbled 17 percent on Halloween from a year earlier, according to RCT’s National Retail Traffic Index.

October, considered a clearance month for fall goods, is one of the least important months of the year on the retail calendar. However, it historically has been an indicator of consumer willingness to spend for the holidays.

Not so this year, according to Feiner, noting that the uncertainty following Sept. 11 is affecting shopping patterns.

"The volatility of mall traffic is a big concern. It makes it hard to predict holiday sales," said Feiner, who reduced his holiday sales projections three weeks ago to a 2.5 percent gain from 4 percent.

"After Sept. 11, consumers began to shun malls out of concern about being in large places," said Kurt Barnard, president of Barnard Retail Trend Report, based in Upper Montclair, N.J. "And when they do go, they spend less out of concern for losing their jobs."

Consumer spending is critical to the economic recovery because it accounts for about two-thirds of the nation’s gross domestic product.

In a separate report, the Labor Department said new claims for state unemployment insurance fell sharply last week but remained high enough to suggest that the terror attacks and sinking economy had sapped demand for workers.

Michael Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd., said his company’s same-store retail sales index of 82 companies was up 2.3 percent, beating his projection for a 1.5 percent gain. However, the increase was fed by Wal-Mart and other discounters. It compares with a 3.8 percent same-store sales gain a year ago.

But department stores were down 4.2 percent, and apparel chains turned in a 7.5 percent same-store sales decline, Niemira said.

Wal-Mart Stores Inc., which continues to take market share away from department stores, reported a robust 6.7 percent gain in same-store sales. That beat the 5.2 percent consensus forecast of analysts surveyed by Thomson Financial/First Call.

Another big winner was Costco Wholesale Corp., which reported a same-store sales gain of 6 percent. And Kohl’s Corp., a moderate department store chain, reported a stellar 13.5 percent gain in same-store sales.

But, Kmart, struggling to emerge from a slump, saw its same-store sales fall 4.4 percent, worse than the 3.7 percent decline analysts expected.

Apparel chains and department stores suffered the most. Gap’s same-store sales, dragged down by Old Navy, plummeted 17 percent. The retailer said it was tightly managing its capital expenditures.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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