US shoppers feel the Christmas pinch

Across the United States, retailers are reporting one of the worst holiday shopping seasons in a quarter-century.

Shoppers in California, where governor Arnold Schwarzenegger last week refused to sign a US$18 billion deficit-reduction plan passed by California lawmakers and issued an executive order requiring staShow more

DENVER // Eager children wanting to give Santa Claus their Christmas list had to wait in a two-hour line that snaked through the Cherry Creek Mall last weekend. Queues at the cash registers, however, were significantly shorter. In Denver and across the recession-hit United States, retailers are reporting one of the worst holiday shopping seasons in a quarter-century, with sales taking a nosedive as nervous Americans cut back sharply on spending. "It feels a crazy time to be shopping because there is just so much uncertainty," said Sonjia Murray, who was hoping to locate every item on her list in just one day. Ms Murray said she would not buy fewer gifts this year, but like many others was seeking out bargains and hoping to spend less overall. "There are a tonne of sales, so you are getting more for your money," she said. Jason Taylor, who was taking a coffee break next to a filled shopping cart at a Target Superstore in Denver, said he and his wife had decided to cut out gifts they normally give to casual acquaintances, buying this year just for family and dear friends. His sister Jamie, seated next to him, said her tactic was to cut out frivolous gifts: "I avoided nicknacks and focused on buying stuff you can use," she said. Such frugal attitudes might seem sensible at a time of fiscal contraction and rising unemployment, however they come at a tough time for the retail industry, which has been reporting limp sales results since September, when a crisis on Wall Street derailed the US economy. There has already been a string of bankruptcies among major US retailers, including Circuit City Stores, the second biggest electronics retailer in the United States, which plans to close 155 of its stores and lay off as many as 7,300 people. Sharper Image and the home-wares giant Linens 'n Things have also declared Chapter 11, while major women's clothing retailers such as Talbots Inc and Ann Taylor Stores Corp have begun to restructure operations. Many economists and rating agencies are predicting the US economy will continue to contract in the first six months of 2009, and probably beyond. Spending, which accounts for two-thirds of the US economy, has never contracted for more than two quarters since the Second World War. Holiday shopping is critical to embattled US retailers, especially department stores, specialty apparel and electronics sellers, who depend on fourth-quarter holiday shopping for as much as 30 per cent of their annual sales and up to 50 per cent of their operating earnings. US stores have tried all sorts of gimmicks to attract customers this year: sales began in November and many malls, including Cherry Creek, put on shows, including live Christmas carol performances and puppet shows for children. Nothing appears to have worked, however. Although the extent of the 2008 decline will not be known until late January, when the government releases fourth-quarter gross domestic product figures, it is already clear that the US public is ringing in the holiday season this year by ringing up fewer sales at the cash register. Bloomberg has calculated that US consumer spending will drop 2.9 per cent in the third quarter, and the Fitch rating service this week predicted consumer tightening will continue into 2009. The monitoring group Spending Pulse has clocked year-on-year sales of appliances and electronics to be down about one quarter, while luxury sales - always the worst hit in a recession - slowed by almost one-third. What has retailers especially worried is the sharp decline in women's clothing sales, since women make the vast majority of retail purchases, and their spending is watched as a key barometer of the industry's health. From formal party dresses to factory outlet items, spending on women's apparel has dipped more than 21 per cent, according to MasterCard Advisors, a division of the credit card company that monitors spending off 300 million cardholders in the United States. Not all sectors are suffering, however. Such discount chains as Walmart and Costco have posted steady sales figures - although even their figures are down from 2007. And proving the old saw that people turn to the bottle in times of trouble, alcohol sales have held steady and in many states actually risen. Liquor excise tax revenues in Colorado, for example, are up seven per cent this year. But even when imbibing, Americans are trying to economise. "Our number of transactions are up, but people are spending less per transaction," said Steve Harp, manager of Lowry Liquors. Cheap wine and bargain liquor flies off the shelf, he said, while premium bottles gather dust. However there was at least one sector where no expense was spared. Two days before Christmas, Denver's upscale Timbuk Toys was doing a brisk business, as busy parents purchased last-minute gifts for their little ones. Brandie Cardenas, the store manager, said contrary to the national trend, customers at her store were choosing higher ticket items, and leaving cheaper stocking stuffers for another year. "People are taking more time and choosing gifts that are meaningful and that will last," she said, adding that it has been a strong year for the store. "Hearing reports of how poorly other retails sectors are doing, we have really felt relieved." [e-mail]