Retailers cross fingers, expect tough holiday season

It's already looking like Christmas at a lot of Minnesota retailers.

Although some insist they're not trying to summon Christmas sales any earlier than usual, others certainly are. Given the sorry state of the economy, many retailers likely are somewhat anxious about the holiday shopping season.

At Patina's south Minneapolis store, you'll find not just the usual eclectic mix of goods that includes everything from white ceramic skulls to pink Cuckoo clocks. You'll also see signs of Christmas — tiny trees, garlands, holiday ornaments and candy and more. "The people are ready for it," said Molly Pool, a buyer for Patina.

About this time every year, the retailer begins stocking its five Twin Cities stores with Christmas goods. Customers are buying.

That's reassuring, Pool said, given the incessantly gloomy news about the economy, as retailers head into their most important part of the year. The holiday season can make or break a retailer, accounting for as much as one-third of annual sales.

"Everybody is wondering what will happen right now with the economy," she said. "We're hoping that things will be similar to last year and we'll be able to push through and have a good year."

Many retailers have their fingers crossed, including Minnesota-based heavyweights Target and Best Buy.

The holiday shopping season could be particularly important for Best Buy, which has seen its sales slip at stores open for more than 14 months, a key benchmark.

There's not a lot of new must-have consumer electronics on the horizon and Best Buy faces vicious competition from Wal-Mart, Amazon.com and other rivals. Analysts expect Best Buy may have a very tough holiday season.

But CEO Brian Dunn was clearly guarded last month in comments to investors about the second half of the year.

"We knew this year was going to be a volatile and uncertain consumer environment and are cautiously optimistic about the back half," he said.

Things look better for Target, largely because it caters to customers who are generally more affluent than most Americans. Analysts say Target has more customers who haven't been really hurt by the recession.

Target is not offering any holiday sales forecast. At an investment conference in September, Chief Financial Officer Doug Scovanner said the discount chain feels it is primed for success, but under no illusions that it will be easy.

"What we experiencing now is what we expect for quite some time," he said. "This is a challenging environment. I don't need to tell anyone in this room," he said. How much will Americans open their wallets this holiday season?

A survey for Reuters in September by America's Research Group found that 27 percent of Americans plan to spend less this year.

But the National Retail Federation, the nation's largest retail trade group, expects holiday sales to rise nearly 2.8 percent to $465.6 billion this year.

That would be better than the average increase over the past decade, but less than last year's 5.2 percent increase. It's slightly higher than the average increase for November and December over the past 10 years.

"This is not going to be a holiday season to write home about," said Ellen Davis, a spokeswoman for the National Retail Federation. "This holiday season is about moderate growth. In an economy like this one, I think that's something most retailers will be happy about."

Other forecasters are more pessimistic. Retail consultant Howard Davidowitz predicts just a one percent increase in holiday sales.

He foresees a good holiday for retailers that rely on rich and upper middle-class people with money to spend. But Davidowtiz doesn't anticipate most Americans spending more this holiday season.

"The consumer has huge debt. Jobs being cut back. Very little growth in our economy," he said. "How good is Christmas going to be? Lousy."

Retailers may not share that assessment of the holidays, but the question is on the mind of every retailer.

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