U.S. retailers are facing a somber holiday season, thanks to the shutdown

  • Article by: TIFFANY HSU , Los Angeles Times
  • Updated: October 17, 2013 - 10:50 PM

Shoppers were pulling back even before the government shutdown, and new surveys indicate that holiday sales won’t match last year.

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Holiday decorations were plentiful at the Mall of America on Thursday, but retailing experts have reacted to the government shutdown by cutting sales forecasts.

Photo: RENÉE JONES SCHNEIDER • reneejones@startribune.com,

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Add another potential casualty of Washington’s gridlock: the holiday shopping season.

The congressional stalemate that brought about a partial government shutdown has rattled Americans already spooked by years of economic weakness. And the uncertainty could stretch into 2014, with debate continuing over the federal budget and debt limit.

The shaky consumer confidence is pummeling sales forecasts for the holiday season, a crucial period that can account for as much as 40 percent of a retailer’s annual revenue.

The National Retail Federation, the industry’s top trade group, said Wednesday that shoppers this year plan to reduce spending on presents and holiday preparations.

More than half of consumers surveyed blame the economy for denting their holiday budgets. And nearly three in 10 fault the bickering on Capitol Hill for cutting into their merrymaking plans.

The average consumer will spend $737.95 on gifts, decor and greeting cards, 2 percent less than the $752.24 shelled out last year. Of more than 6,000 survey respondents, nearly 80 percent said they intended to spend less overall during the season.

The value of gifts for family members is projected to slide 2 percent from last year.

The Standard & Poor’s credit rating agency also sketched a bleak picture.

“If people are afraid that the government policy brinkmanship will resurface again, and with it the risk of another shutdown or worse, they’ll remain afraid to open up their checkbooks,” Standard & Poor’s researchers wrote. “That points to another humbug holiday season.”

Retail sales had been lagging even before the shutdown. In September, during the prime back-to-school season, sales at stores open at least a year grew only modestly and missed Wall Street’s expectations. Analysts blamed volatile weather, middling wage growth and uninspiring fashions on top of the looming threats of closing government agencies and defaulting on the national debt.

Retail growth has been weak all year. Many stores spent September trying to purge aisles of piles of stock from the summer.

The slow performance isn’t surprising, considering the backdrop of the national economy, which expanded at a “modest to moderate pace” in September and early October, according to the Federal Reserve’s beige book report this week.

The report, so named for the color of its cover, showed that employment growth remained muted, with many businesses “cautious to expand payrolls, citing uncertainty surrounding the implementation of the Affordable Care Act and fiscal policy more generally.”

Consumers boosted spending on technology and big-ticket items such as autos and home goods, driven by pent-up demand and attractive financing deals. But overall, retail sales “were a bit soft,” according to the report.

Small retailers haven’t been faring well, according to research firm Sageworks. Revenue at mom-and-pop retailers with less than $5 million in annual sales has shrunk nearly 2 percent this year after three years of growth, Sageworks said.

Marshal Cohen, an analyst with NPD Group, said he expects the coming holiday season to “be a tricky one for retailers.”

“With fewer days between Thanksgiving and Christmas, government distractions and lack of newness in the marketplace, retailers will have to rely more on promotions to excite the consumer,” he said.

This week, the International Council of Shopping Centers said the government shutdown already had forced 40 percent of consumers it surveyed to limit their spending.

Of those, the majority said the size of their scale-back had been minimal. But about a third called the drop “considerable.”

The survey of a nationally representative sample of more than 1,000 adults found that nearly half of those with less than $35,000 in annual income were being more frugal, compared with nearly a third of respondents earning more than $100,000.

“It is clear that the fallout of the past two-week impasse in Congress has affected consumers’ willingness and maybe their ability to spend,” said Michael Niemira, vice president of research for the shopping centers group.

 

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  • A few shoppers strolled the Mall of America on Thursday. Shaky consumer confidence is pummeling national holiday sales forecasts.RENÉE JONES SCHNEIDER • reneejones@startribune.com

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