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Economy

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Associated Press
Roxanna Garcia shops with gusto in November 2012 in Burbank, Calif. Retailers worry that shoppers will cut back in 2013.

Retailers brace for gridlock effect on holiday shoppers

– Will Washington be the Grinch who stole Christmas?

After weeks of bickering between Congress and the White House, President Barack Obama on Wednesday signed into law a plan that ended a partial 16-day government shutdown and suspended the nation’s debt limit until early next year.

But the measure, which comes just weeks ahead of the holiday shopping season, only temporarily averts a potential default on U.S. debt that could send the nation into a recession.

Retailers hope that short-term uncertainty won’t stop Americans from spending during the busiest shopping period of the year, but they’re fearful that it will.

“I am not nervous, but I am mindful,” said Jay Stein, chairman of Stein Mart, a 300-store chain that sells home goods and clothing. “The biggest enemy of consumer confidence is uncertainty.”

Retailers and industry watchers say Washington gridlock already has caused shoppers to hold back on purchases.

The number of people going into stores nationwide dropped 7.5 percent for the week that ended Oct. 5 and 7.1 percent during the following week compared with a year ago, according to ShopperTrak, which measures foot traffic at 40,000 retail outlets across the country.

Menswear retailer Jos. A. Bank Clothiers and furniture chain Ethan Allen said their customers cut back in recent weeks.

Auto sales, which had been strong, trailed off last week, with experts blaming Washington lawmakers.

Retailers say the agreement that lawmakers approved, which funds the government until Jan. 15 and gives the Treasury the ability to borrow above its limit until Feb. 7, may not be enough to alleviate shoppers’ concerns.

Robert N. Wildrick, chairman of Jos. A. Bank, which has 623 U.S. stores, said retailers can’t afford more uncertainty during the holiday shopping season.

“The more this nonsense goes on .... the more scared (consumers) become,” he said.

Even before the stalemate in Washington, retailers had reasons to be cautious about the holiday season, which accounts for up to 40 percent of retailers’ annual revenue.

While the job and housing markets are improving, that hasn’t translated into sustained spending increases among shoppers.

But retailers spend money on ads, order additional inventory and add sales staff during the holidays, hoping shoppers will spend freely.

If they don’t, stores have to discount, which eats away profits.

The National Retail Federation, the nation’s largest retail group, had forecast in early October that sales would climb 3.9 percent in November and December to $602.12 billion, higher than last year’s 3.5 percent gain.

But the forecast didn’t account for the prolonged shutdown.

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