“Holidays are looking less Grinchy this year”

Holidays are looking less Grinchy this year

Posted: 07 Nov 2010 01:49 AM PDT

By USA Today

There are signs the chill on holiday spending is beginning to thaw.

Consumers may not be giving gifts like it's 2006 again (before the Great Recession), but new surveys suggest some will spend a bit more and start giving presents that people want rather than simply need this year.

Think jewelry, rather than slippers and sweaters.

"It's not all about being cheap this year," says Pam Goodfellow of BIGresearch, which does consumer polling for the National Retail Federation.

The conclusions in various consumer surveys about holiday spending differ a bit, though no one's predicting a big uptick in shopping late this year. But beyond the predictions for unchanged or only slightly improved sales are other indications of a rebound. The National Retail Federation predicts holiday spending this year will be up 2.3 percent, but the percentage of people who said the economy would affect their spending decreased from 65.3 percent last year to 61.7 percent this year. Several of the companies conducting surveys also see evidence that gift purchases will start to lean more toward discretionary than necessity. For example, the percentage of those who will ask for jewelry this year is up 13 percent, according to NRF, and the percentage who will buy at least one gift from a discounter is down.

There were echoes of the trend in the October sales reports out Thursday from luxury and clothing retailers, whose bottom lines have taken a beating in the past two holiday seasons. Sales results overall were mixed, with the International Council of Shopping Centers reporting just a 1.6 percent increase over October 2009. Unusually warm weather slowed outerwear sales and kept people out of stores, including JC Penney and Kohl's, which saw sales decline. But Macy's had a sales increase of 2.5 percent, and sales were up 8.1 percent at high-end retailer Saks, which analysts were expecting would only see a 2 percent uptick.

Saks spokeswoman Julia Bentley says the retailer is on track to maintain "mid-single-digit growth" in sales from August through January 2011, despite cutting the number of promotions since last year.

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Handbag and accessory maker Coach, which has started offering lower-priced options, said last week that its revenue was up 20 percent in the first quarter of fiscal year 2011.

Much of the growth is coming from the wealthiest consumers, says Josh Chernoff, leader of business consulting firm Bain and Co.'s North American retail practice. Households earning more than $100,000 a year make up just 21 percent of households but are driving almost 40 percent of overall consumer spending, he says. That's up from 34 percent of consumer spending in 2006. Retailers who cater to the affluent — higher-end department stores, luxury retailers and warehouse club stores — are doing the best "and we think we'll see that trend continue through the end of the year," Chernoff says.

Mark Tapper, co-owner of Tapper's jewelers in the Detroit suburbs, has seen double-digit sales growth this year and is predicting a 25 percent increase in sales this holiday season at the two stores the company has had for several years. Damning the economic naysayers, the Tappers opened a third location in Troy, Mich., in September. The chain has increased its selection and promotions of lower-priced items, including Pandora-brand jewelry that starts at $25 and a $1,199 engagement ring, but it's still catering to customers looking for the finest jewelry.

"Every day, people asked us if we were crazy," Tapper says of opening a new jewelry store. "But we believe in this economy."

Other indicators:

n Global information company Nielsen says 36 percent of people it surveyed said they'd be spending less this year, a decrease from last year when 42 percent reported plans to cut back. Despite the loosened grips on wallets, Nielsen still expects sales this holiday season to be unchanged from last year. But Nielsen agrees there are bright spots for luxury retailers and others who sell more of the want-to-haves than the must-haves.

n Management consulting firm Accenture also predicts spending this season will be flat, due in part to the fact that 83 percent of those it polled said they would spend the same or less than last year. Still, Janet Hoffman, managing director of Accenture's retail practice, says the company is "seeing a rebound in luxury" and agrees with NRF that "want" buying is also making a comeback.

Mike McAvinue, general manager of The Mall at Short Hills in Short Hills, N.J., says stores are requesting far more storage space for inventory this year, especially those that sell high-end merchandise. Luxury stores at the mall say they've bought about 10 percent more this year over the 2009 holiday season.

Still, Hoffman says shoppers will still keep a close eye on value for the dollar.

n Shoppers may have a "conservative outlook" on the economy, but consulting firm Deloitte concluded it isn't hindering their holiday plans. More than six out of 10 survey respondents said they plan to spend more or the same on the holidays — an 11 percentage-point increase from Deloitte's 2009 holiday survey and the highest level since 2006. Two-thirds of respondents said their household financial situation is the same or better than last year at this time. That's up 10 percentage points since last year.

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