If there’s a worse place to be in today’s economy than the gasoline pump, it may be behind a retail cash register.
Department stores, home-product outlets and specialty shops are being squeezed between high costs and tightfisted consumers.
That’s creating discounts for shoppers who are able and willing to spend.
“Sometimes, things are so cheap you have to buy. Everybody’s fighting. I see ‘Buy one, get one free’ signs everywhere,” said Ken Myer, 44, a health-care worker from Los Angeles, as he left a liquidation sale at Linens ‘n Things in east Denver. “I’ve bought more suit jackets and shoes in the last week. You just can’t help it.”
Melody Callander, 37, of Denver was impressed by the recent discounts at J.C. Penney at the Shops at Northfield Stapleton, where most clothes were marked down 25 percent to 70 percent.
“You can tell they’re trying hard to make some sales,” she said.
High gas and food prices are cutting deeply into household budgets, and falling home values and stock portfolios are making many people feel poorer. Adding to the pullback are rising job losses.
Consumer spending and retail sales continued to grow modestly during the last few months, thanks to $107 billion in economic-stimulus checks delivered to taxpayers in May, June and July. With that money mostly spent, the rest of the year may be more difficult for shoppers and retailers.
“I’m more careful with my shopping now,” said Susie Earhart, 61, a home caregiver from Aurora, as she left Linens ‘n Things with a bag full of bargains. “I make it count when I’m going somewhere since gas is so high.”
Consumers responded slowly to summer-clearance and back-to-school sales this year, prompting many retailers to offer deeper discounts.
At Old Navy in the Belmar shopping area of Lakewood recently, summer-clearance clothing was priced 25 percent to 50 percent off, but some items were even more heavily discounted. Ladies’ maternity pants were marked down from $29.50 to $9.99 and then again to $4.99. Men’s T-shirts were discounted from $14.50 to $4.99.
Linens ‘n Things, which is bankrupt and closing stores, marked down inventory by up to 80 percent. Pier 1 Imports, also financially troubled and closing stores, discounted selected items by up to 75 percent.
“Retailers don’t know how to react. They’ve never seen a time when sales didn’t work,” said Britt Beemer, a retail analyst and marketing specialist in Charleston, S.C.
Consumers pull back
Some retailers are folding. Others are closing stores, and still more are pushing back expansion plans. Most are simply trying to weather the storm.
“Sales are flat, but in this economy, that’s probably a great place to be,” said Janci Frisby, co-owner of Belly, a maternity and children’s clothing store in Cherry Creek. “We’ve introduced many more mid- priced lines over the last year and a half. … If you don’t address your consumer, you won’t stick around.”
The store also is using more discount promotions to lure customers, she said.
Sales of high-end kitchens aren’t on the rise for Stephen “Mac” McDonald, owner of a chain of 14 showrooms across Colorado including Thurston Kitchen & Bath and Kitchens at the Denver.
“We’re going to come off this year very similar to last year, and I think I’ll be happy with that,” McDonald said. “We’re working real hard right now. I think the good ones will continue to do well.”
New construction work is way down, but remodels are picking up the slack, he said.
Consumer spending rose 1.5 percent in the second quarter from a year earlier, up from 0.9 percent during the first quarter. The International Council of Shopping Centers said last week that sales for the final week of July were up 2.9 percent over last year, the highest jump this year. The council said it expects July retail-chain sales to rise 2 percent to 3 percent above last year.
The modest gains, however, aren’t spread evenly. The ICSC and UBS reported last month that June sales at department stores open at least one year fell 4.1 percent from the previous June. Sales for discounters such as Wal-Mart and wholesale clubs such as Costco were up sharply.
“We’re in difficult times, and it’s not over,” said John Melaniphy, a Chicago-based retail- market strategist. “I don’t really see a recovery in consumer spending until 2010.”
Experts say the health of the American consumer is central to the question of whether and how deeply the economy falls into a recession. Consumer spending accounts for more than two-thirds of U.S. gross domestic product.
There are strong indications the economy is in for a long period of reduced consumer demand. Americans are heavily in debt and unable to tap their home equity as they did in the past. Yet spending has rebounded after downturns in the past, giving some economists hope that the current pullback by consumers will be temporary.
A growing number of national retail chains are canceling expansion plans or closing stores, including Linens ‘n Things, Pier 1, Mervyns, Comp USA, Sharper Image, Ann Taylor, Talbots, Foot Locker, Blockbuster and Zales.
Apparel sellers are in particular trouble because they’ve been unable to raise prices to cover their surging costs. Apparel prices fell 0.2 percent in the 12 months that ended in June while overall inflation was 5 percent.
Even the high-end luxury segment is seeing hard times.
Craig Andrisen, co-owner of Andrisen Morton clothiers in Cherry Creek, said sales are down slightly over last year but “still strong.”
“The saying now is ‘If you’re flat, you’re up,’ ” Andrisen said. “For the most part, our clients are still doing very, very well, but they don’t feel well about spending the money.”
Demand for new retail real estate is also slowing. This year, Cabela’s pushed back by at least two years plans to build a massive outdoor-recreation store in Wheat Ridge. The Nebraska company blamed the slowing national economy.
“A lot of new developments are being stymied because the majors aren’t building,” said Michael Staenberg of St. Louis-based THF Realty Inc., which operates a handful of retail centers throughout Colorado.
CB Richard Ellis reported last month that the Denver-area retail vacancy rate was 7.5 percent in the second quarter, up from 5.8 percent a year ago.
David Larson, a partner with Denver-based Legend Retail Group, a brokerage firm specializing in retail leasing, said the only retail projects that are proceeding have preleased tenants.
The Denver market isn’t as overbuilt as it was in the late 1980s, when an economic downturn resulted in a real-estate crisis in Colorado, Larson said.
“If you compare it to the 1980s, it doesn’t look so bad right now. That was ugly,” he said. “… Boxes turned into churches or bingo parlors.”
Greg Griffin: 303-954-1241 or ggriffin@denverpost.com
