Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!usa-post Newsgroups: usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Thu, Apr 16 1992 Date: Thu, 16 Apr 92 05:42:24 EDT Message-ID: 04-16 0000 BONUS: Stores doubt rebound will last USA TODAY Update April 16, 1992 Source: USA TODAY:Gannett National Information Network Seattle clothing retailer Butch Blum laid off one of his 10 employees early last year, hoping to rehire the worker when the economy picked up. But around Christmas he had to cut further, laying off a second worker. And now he says the cuts are permanent. Richard Miller is chief financial officer of Sterling, a national jewelry chain with 1,000 stores in 39 states. His story is no more encouraging. "Sales are still running behind last year," Miller says. "We would love to be optimistic, but we are not. We see no fundamental reason to be jubilant." WHY AREN'T RETAILERS TRUMPETING ANY SIGN OF RECOVERY? Retailers large and small, a group that seemingly should be trumpeting any sign of a recovery, just won't cheer up. Retail revenue has been ticking higher this year, and each month more economists declare an end to the recession. In March, 92% of economists polled by USA TODAY said the recession was over. Yet each month vast numbers of retailers say they need another month of good news before they'll have any confidence in the numbers. The National Retail Federation, in its March report, predicts any recovery in retail sales will lose steam by summer. WHAT DO RETAILERS SEE THAT SO MANY OTHERS HAVE OVERLOOKED? Jack Schultz, president of the NRF, says there are two reasons his members can't get excited: They were burned last spring, when monthly revenue increases seemingly signaled a recovery, but evaporated along with consumer spending by summer; and many retailers fear that even in a recovery they won't fare that much better. "We do not expect the bounce-back we have seen after past recessions," Schultz says. "The consumer may have changed for good." ARE OTHERS ECHOING THOSE WORRIES? Many, such as Steve Davis who runs two upscale men's stores in Chicago, just don't see the store traffic they expect in a recovery. "I see a lack of body count in my stores," says Davis. "When you're on a diet you don't go into the kitchen. Shoppers are still dieting." Davis says his customers are still quibbling over price. "You know you are still in tough times when men worth millions are arguing with you over the price of a tie," Davis says. WHAT DO MANUFACTURERS SEE? Manufacturers see hesitancy too, especially those supplying department stores. "Things may have stopped getting worse, but they are still terrible," says David Howell, chairman of Strouse Adler, a lingerie manufacturer. "The stores need major proof of recovery. One month of good numbers is not going to do it. They'd like to see nine months before they believe." WHAT'S THE BIGGEST CONCERN OF RETAILERS? Retailers say their biggest concern is layoffs. As long as layoffs are in the news and joblessness remains fairly high, consumers will stay away from big shopping trips. There appears to be no letup of bad news. This week, IBM said it will eliminate 4,500 jobs - another move in a yearlong streamlining effort. Sears and Data General announced layoffs two weeks ago. WHERE ELSE ARE HARD TIMES SEEN? Last month, nearly 1,000 people applied for seven openings at Ben and Jerry's Homemade Inc. and Woolworth said it will close its Richman Bros. chain, putting 4,500 people out of work. Such events magnify what many had hoped was strictly a problem for 1991, when an average 14,400 people a week lost their jobs. WHY ARE RETAILERS UNWILLING TO BELIEVE A RECOVERY HAS BEGUN? This time last year, the Persian Gulf war had ended, the weather was warming, and some economists were saying the recession had ended. A few months later it all fell apart. The back-to-school season was terrible; Christmas was worse. Who can believe it now? "There's no consistency to the economy. It still feels like a roller coaster," says Blum. March revenue added to the confusion. Even The Gap, virtually unstoppable through the recession, posted lower March revenue. That was partly due to Easter falling in April this year instead of March, as it did last year. WHAT IS ADDING WEIGHT TO THE PESSIMISM? Tuesday, the Commerce Department reported a 0.4% drop in March retail revenue - the worst decline in seven months. But Wall Street quickly factored in the Easter effect as well as some unusually cold weather that kept shoppers at home in parts of the country. It concluded the numbers were, in fact, better than expected. Many retail stocks rose. What really has retailers depressed goes beyond the day-by-day economic numbers. WHAT'S DEEPER THAN THE NUMBERS? Retail bankruptcies are already at a record level, but store owners say the shakeout is far from over. Shopping-center space has grown 80% since 1978. Retail analyst Walter Loeb says the USA has about 35% more retail space than it can support. Dan Sweeney of Management Horizons says the shakeout will move beyond individual retailers and weed out entire shopping malls. About 600 of the 1,800 malls in the USA are strong, says Sweeney. About 180 are struggling, and should be shut down, he says. The rest fall somewhere in between. WHAT DO DEMOGRAPHICS SHOW? Retailers may have lost many customers to the maturing process. Baby boomers have mostly outgrown their frenzied acquisition stage. Certainly, they will continue to shop. But they have changed, and may never run up the kinds of shopping bills they did in the 1980s. "We are entering a belt-tightening mindset," says marketing expert Fran Turchiano, author of The (Un)Malling of America. "This is not a fad. This is not a trend. This is a fundamental change." Adds Jack Aezen, president of women's shoe company Jack Sprat based in Philadelphia, "This is the most drastic change in customer mood since the Depression." HAVE STINGIER SHOPPERS PRODUCED A RUTHLESSNESS AMONG SURVIVERS? Dillard Department Stores is pressuring a manufacturer to produce a lower-cost, private-label line, and the company has publicly criticized manufacturers for not investing in expensive computer technology to link their factories with Dillard stores. Wal-Mart recently stopped dealing with wholesalers, demanding to work directly with manufacturers to save money. ARE CONSUMERS EVEN MORE RUTHLESS? Yes, say retailers. They won't be lured by sales, won't be fooled by gimmicks and won't spend a day running up their charge-card balance. "Those days are gone," says Davis. "We will all have to find new ways of doing businesss. The old ways are no longer." Bonus Editor: Michele Coleman. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM