Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, November 28, 1993 TAG: 9311290285
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: SANDRA BROWN KELLY STAFF WRITER
DATELINE: LENGTH: Long
Even though consumers are answering surveys that they won't spend any more than they did last year, stores likely will increase profits because they've cut their costs of doing business, analysts say.
Plus, retailers apparently don't believe consumers when they talk about what they will spend. Deloitte & Touche of Richmond surveyed 70 merchants in October and found that more than half expect to have higher sales and profits this season.
"We've often said that consumers' brains, mouths and wallets don't work in tandem," said analyst Kenneth M. Gassman Jr., a senior vice president with Davenport & Co. of Virginia Inc., a Richmond securities firm.
"While consumers may tell the pollsters that they won't spend as much this year on Christmas, we suggest that it would be un-American to respond any other way," he said. "We think the axiom `money burns a hole in the pocket of the typical consumer' reflects reality."
Gassman, in his holiday forecast last month, said sales would rise by 5 percent to 7 percent over last year's holiday season.
Last week, he said he is convinced sales will come in "on the high side" of his prediction.
The National Retail Federation projects a sales increase in the fourth quarter of 2.5 percent. However, Gassman has been accurate in his forecasts for the past seven years.
The season is ripe for business, he said, because unemployment levels are declining, job layoffs have slowed, interest rates are low, the stock market is steady and the sale of durable goods is up. As important for putting shoppers in the right mood, the weather is supposed to be cold, according to woolly caterpillars and the Farmer's Almanac.
Plus, some consumers have refinanced their homes to cut monthly mortgage payments. And while they said they'll save the difference, Gassman bets "the money will be spent on gifts."
He said the main indicator that the season will be a success, however, is an increase in mail-order sales.
For example, the Lillian Vernon Co., a Virginia Beach catalog merchant of housewares, gifts and novelties, upped its employment 20 percent because of orders.
At the Orvis Co., which fills orders for sporting goods and casual clothing at its Roanoke warehouse, employment has gone from 428 at the end of August to nearly 600, said John Moticha, vice president for operations.
The company is having its biggest year ever, he said. The Roanoke center took 10,000 calls last Monday, and the biggest call day is still to come - this Monday.
Orders also are up substantially at Orvis retail shops, Moticha said.
Shoppers probably don't realize it as they push their way through crowded malls, but their holiday spending can make or break a retailer.
For example, Leggett Department Stores does 31 percent of its annual business in November and December, an executive said.
Fink's Jewelers, a Roanoke-based company, does one-third of its volume in those two months and "maybe 25 percent of the year's volume in the last two weeks before Christmas," said Mark Fink, president.
Both companies anticipate a good season.
"I think it will be our best year since boom times of the mid-1980s," said Fink. His company mailed out 125,000 Christmas catalogs.
Fink, who is sure enough about business in general that he opened a new store last week in Chesterfield County, said his stores have tried to stock items in a wide range of prices and will do special promotions to capture shoppers' dollars.
T.C. Leggett, vice president of merchandising for Leggett, said he also expects the season to be better than ever for his regional chain, which last Christmas opened on Sundays for the first time.
Most of retailing is "event" selling, Gassman points out, and the last two months of the year include two big events - Christmas and Hanukkah.
"The November-December period not only produces heavy retail sales, but merchants' profits are typically strongest during Christmas," he said. Since retailers' costs are relatively fixed all year long, the increased business at Christmas falls mostly to profit.
Some jewelry stores don't make any money except at Christmas, he said.
Because the season is so important to retailers, they are always looking for new ways to woo customers.
The Deloitte survey found merchants were offering free gift wrapping, gift-with-purchase incentives, in-store entertainment, VIP customer nights, fashion shows and personal appearances by celebrities.
The toy giant, Toys `R' Us, created its own tradition to boost its profile and sales by producing an animated television special "Nick and Noel."
The show was broadcast last weekend, but stuffed versions of the lead characters, a dog and a cat, along with a video of the show have been for sale for some time in the stores.
Leggett stores will spend about $800,000 on free gift wrapping services this season, said Leggett.
"We're trying to provide all the services we can," he said.
Judy Tullius, manager of Tanglewood Mall in Roanoke County, said the mall considered offering free gift wrapping this year, but decided to continue the wrapping booth that is run as a fund-raiser by a PTA group.
The Roanoke County mall is using several other tactics to attract and please customers, however. The number of wheelchairs and strollers available to shoppers has been increased. An antique carousel will provide children's rides for $1.
Tullius brought in 27 temporary tenants for the season and believes the mall also will get an extra boost from the presence of Applebee's restaurant, which is scheduled to have its grand opening Monday.
TOYS AND SPENDING HABITS\ Here are some facts about toys and spending habits from Zillions magazine, the Consumer Reports publication for children.
\ Children ages 6 to 13 spend almost $9 billion a year.
\ Those children will spend $2 billion of their own money this holiday season.
\ U.S. toy manufacturers sold $13 billion of toys last year.
\ American kids who have video games play the machines an average of 1.5 hours a day.
\ Sales of Sega's video game called "Sonic the Hedgehog" have exploded, rising from $400 million in 1990 to $1.65 billion last year.
by CNB