Outlook Cautious for Retailers This Year

Jan. 15 -- Retailers may have done better than expected in December's critical shopping season, but the industry is still expected to face quite a few challenges this year.

Many economists and industry watchers say retailers will have to walk a balancing act between promotions and exciting new products to get consumers interested in buying this year.

December retail sales were $295.1 billion, the U.S. Department of Commerce reported today. That represents a smaller-than-expected drop of 0.1 percent from November, and a rise of 4.1 percent from December of 2000. But some analysts attribute the robust sales to the aggressive promotions and discounts that many stores offered to lure holiday shoppers into their stores.

And now that many consumers have filled their closets with bargains and bought their zero-percent-financed automobiles, some analysts say promotions may not be enough to stir consumer excitement in many stores this year. Instead, retailers are going to have to offer unique products, good value and even some entertainment to get shoppers to open up their wallets.

"I don't think sales are going to work any more," Walter Loeb, president of retail consulting firm Loeb Associates, said at the National Retail Federation's annual conference in New York.

"The consumer is still worried," said Loeb, who doesn't expect a turnaround in the industry until later this year.

Cautious Optimism

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The National Retail Federation is optimistic that consumers will indeed be trolling for goods this year, with low interest rates and inflation, falling energy prices, mortgage refinancings and a steady stock market contributing to confidence.

The NRF is forecasting a 3.7 percent rise in sales at general merchandise, apparel, home furnishing and electronics this year from 2.2 percent in 2001 and is expecting the economy to recover in the first quarter of 2002.

Still, other economists say a turnaround may not be so imminent.

"It would be wrong to prematurely be celebrating the onset of a recovery," said Stephen Roach, chief economist at Morgan Stanley.