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Local retailers in better spot than others

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Written by Robert Bell Friday, 21 November 2008

Holiday spending forecasts range from ‘paltry’ increase to slight sales decrease.

Without a doubt, the United States is facing some tough economic times. The housing market decline, credit crunch and near-collapse of the financial sector have all preceded the biggest drop in consumer confidence on record, according to the Conference Board, a nonprofit business research organization that tracks consumer habits. With the holiday shopping season approaching, many of the country’s retailers are especially concerned.

Whether retailers will see an increase or a decrease in sales this year depends on whom you ask. A National Retail Federation report forecasts individual consumer spending will be up “a paltry 1.9 percent” over 2007, while an October study by retail consulting firm BDO Seidman LLP is predicting a 2.7 percent drop in holiday sales.

But in the midst of an uncertain national retail outlook, Leander and Cedar Park are in a better position than many other communities. Several new retailers have opened in the region in the last year. So even if shoppers cut back on spending this year, the cities will still see an increase in sales tax collections.

As to how the national economic slowdown will affect cities’ bottom lines, “it’s kind of hard to say,” said Phil Brewer, economic development director for Cedar Park.

“We are going to have, this holiday season, a good part of 1890 Ranch open and more commercial stuff in terms of retail on the ground. That translates into capturing sales tax dollars this year that we didn’t last year,” Brewer said.

Cedar Park projects a 13.3 percent year-over-year increase in sales tax collections, said Joyce Herring, finance director. More than a quarter of that increase is directly attributable to new openings at 1890 Ranch.

Leander also has stores that were not open last year. Lowe’s and Kohl’s will give residents new options for holiday shopping.

“I don’t think it’s going to be an over-the-top, yahoo Christmas, but I think it’s going to be fine. My entire year has been good, so I don’t expect it to take a big fall.” — Burt Witcher, owner of Burt Witcher Jewelers These new stores will also give a big boost to the budget. Leander projects a 41.5 percent year-over-year sales tax revenue increase, said Sharon Johnson, assistant city manager and finance director.

Black Friday

Contrary to what hourly retail employees might say, Black Friday not only refers to the fact that those workers dread the “busiest shopping day of the year” like they would the Black Plague. It also alludes to the notion that the day after Thanksgiving, and the bargain-hunting, early morning hordes it unleashes, is typically when accountants can put away the red pens because retailers are back in the black.

In reality, Black Friday is not always the busiest day for retailers, at least from a sales standpoint. But many stores are going to be offering significant holiday sales and much more aggressive discounting than usual.

“This year, more so than in the past five years, we’re going to have a lot of promotional items,” said Steven McCandless, store manager of Sears at Lakeline Mall. “They’re called door-busters by retailers, and there are going to be a lot more door-busters this year than in the last few years.”

Havertys Furniture in Cedar Park will also be offering more sales this year, said Lance Ralston, store manager.

“We are running some of our more aggressive promotions going into the end of the year,” he said. “We’re obviously not going to sit back and expect customers to not be looking for bargains.”

There is a belief among many in the Texas retail world that the state will fare better than the nation as a whole.

“I think everybody is, for the most part, beginning to feel the effects of a slowing down of the economy,” said Ronnie Volkening, president of the Texas Retailers Association. “The overall sales tax revenues continue to be a little bit up from last year — close to flat, but still just a little bit up. It’s a sign of the resiliency of the Texas economy as compared to the rest of the nation.”

Pragmatic purchases

Shoppers this holiday season will likely alter their spending habits and purchases. Certain types of consumer electronics, such as DVDs and digital cameras, will probably do well, said Scott Krugman, vice president of the National Retail Federation. Those types of gifts “tie people into their homes and families,” he said. “We saw a lot of that type of spending post 9/11. I think, at least from an economic standpoint, people are in a similar frame of mind.”

Other types of purchases that are expected to be popular this year include apparel and household items such as tools, appliances and similarly pragmatic gifts.

“In times where you’re really uncertain about the future, people tend to really only make those bare essential purchases,” Volkening said. “Anything that comes under the category of discretionary expenditure, consumers are much more cautious about that.”

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Nonetheless, “if you’re among the fortunate folks who have disposable income, it could be a good buyer’s market out there to look for deals,” he said.

Volkening has spoken with residents and business owners in Cedar Park and Leander and said they are “very excited about the opening of the stores in their neighborhood.

“They may be bucking the trend, and comparatively speaking, that is a very vibrant area. They’re hoping that they’ll get a lift at those stores, and those stores’ sales ought to be stronger than the norm.”

Shoppers were definitely excited about the opening of Charming Charlie in Cedar Park. Shoppers at 1890 Ranch were peeking inside the Houston-based women’s accessories store before it was even open, said Kasia Romo, general merchandise manager.

Several retailers at various levels seemed to echo Volkening’s assessment, including the recently opened Academy Sports + Outdoor in 1890 Ranch.

“We have been fortunate at Academy,” said Carl Main, vice president of marketing for the company. “We’re not insulated, but we haven’t experienced a drop-off in sales at all.”

Main said his company has a positive outlook for the holiday season, but acknowledged that many shoppers are going to be looking at prices more closely than they might have in the past.

The state of the economy will also probably cause shoppers to take a wait-and-see approach, putting off big purchases until closer to Christmas, said Burt Witcher, owner of Burt Witcher Jewelers in Leander.

“I don’t think it’s going to be an over-the-top, yahoo Christmas, but I think it’s going to be fine,” Witcher said. “My entire year has been good, so I don’t expect it to take a big fall.”

1890 Ranch Circuit City closing

Circuit City Stores, Inc. announced Nov. 3 that it would close 155 underperforming stores in 28 states, citing factors ranging from a weakened retail environment and declining consumer confidence to an $80 million tax refund the company claims it is owed by the federal government. The company filed for Chapter 11 bankruptcy protection Nov. 10. The Cedar Park store, which has been open for just more than one year, is among the nine Texas stores that will be shuttered.

Texas cities where Circuit City stores are closing: