Dread spreads with red ahead


There are plenty of numbers to suggest 2008 could be the worst holiday for retailers since 1991.

Folks who don't believe those numbers should just go shopping if they want proof. They'll find shopping centers where traditional Christmas village decor is replaced with the ambience of a ghost town.

"We are in a big drop right now and a lot of small businesses are going to go out," said Arun Lavingia, owner of Gift Connection, a small store in Boulevard Mall.

On a recent weekday, Lavingia worked alone and still outnumbered the number of customers on the shop floor.

The Boulevard Mall store is one of 10 gift shops he owns; the rest are in California. Lavingia estimates business is down 40 percent this season at the Las Vegas location.

His store is an oasis of tchotchkes deep in a quiet corridor of the mall. The inventory mishmash includes backlit, motion-photo art, Elvis statues, crucifixes, samurai swords and fantasy figurines.

Lavingia says the lineup has served him well during the five years he's been in business in Las Vegas.

"The reason I'm surviving is because my price points are low," he says.

Until October, Gift Connection and other stores in the same corridor could peel customers from the foot traffic between Macy's and Dillard's.

Then Dillard's closed, leaving a two-story empty shell at the south end of Boulevard Mall.

Now there are six empty storefronts out of approximately 20 in the corridor, in addition to the old Dillard's.

Customers who park in the Dillard's parking lot along Maryland Parkway -- the closest parking to the corridor -- can no longer enter the mall through the department store. Instead, there's a temporary sign on the sidewalk that points to a plain, gray steel door marked "Mall Entrance" in large block letters.

The door opens to an unfinished hallway that leads about 30 paces to another plain door into the mall.

Shoppers who find their way into that part of the mall won't find much company.

Christmas music pours from the speakers and echoes off the bare walls and hard floors because there are few people or displays to absorb or compete with the sound system.

The scary part for people in retail is that empty storefronts and deep discounts are commonplace even though the calendar still says Christmas is more than three weeks away.

If this is indeed the peak for the year, and the calendar says it is, things are bound to get worse.

And the carnage won't be limited to small businesses.

"I'm telling you, it is going to be a bloody Christmas," said Rich Kizer, a Chicago-based retail consultant who makes frequent trips to Las Vegas. "The vast majority of people are maxed out."

Kizer and his business partner Georganne Bender took a recent stroll through Boulevard and some other Las Vegas retail businesses.

The hallmarks of recession were everywhere, most prominently in the form of signs advertising big sales. The signs are evidence that retailers are fearful they won't sell the inventory they have now, let alone whatever else may be coming in next year.

That makes them desperate to shed products, because if customers are timid now, they'll be in consumer hibernation as soon as the holiday is over.

"(Retailers) can't recapture those sales after Jan. 1," Kizer said. "They have to sell that product."

The list of retailers who are teetering or already succumbed to the recession is imposing.

Circuit City, Linens 'n Things, Mervyns, Steve & Barry's and The Sharper Image are just some of the big names to go broke. The list of retail companies cutting back is voluminous.

Chicago-based ShopperTrak forecasts retail foot traffic will decline 9.9 percent this season. If so, it would be the worst holiday shopping season since the research firm began keeping records in 2001.

ShopperTrak founder Bill Martin compared the season with 2002, which also included a recession and a 27-day span between Thanksgiving and Christmas. That's in contrast to 2007, which had a 32-day season, the longest possible span.

"If the correlation between 2002 remains true, this is yet another strong factor that could influence fewer visits to malls and retail outlets, negatively impacting sales," Martin said.

This year ShopperTrak reported a 2.2 percent decrease in traffic at enclosed malls during election week. It was actually a positive indicator in relation to the election week in 2002, when traffic fell 3.9 percent and remained down through the holidays.

But other indicators are much direr than anything in 2002.

For starters, consumer confidence is way down.

At a recent presentation to the Las Vegas Convention and Visitors Authority, authority Marketing Vice President Terry Jicinsky said the Consumer Confidence Index has shrunk from 110.2 in February 2007 to just 38 in October, an all-time low.

In contrast, the index stood at 85.4 in the weeks after the Sept. 11, 2001, terrorist attacks.

At the same meeting, Jicinsky outlined a plan by the authority to set aside $4 million for additional marketing efforts, much of them aimed at promoting Las Vegas as a retail destination during the holiday season and in early 2009.

The outreach by the authority -- a group led by local government officials and executives from the largest gambling resorts -- is an indication that small businesses and traditional mall retailers aren't alone.

MGM Mirage, the largest private employer in Nevada and owner of 10 hotel-casinos on the Strip, recently announced plans for big sales at its retail locations.

The after-Thanksgiving promotions are significant because casinos aren't typically lumped in with the locals-market retail scene. The promotion covers MGM Mirage-owned stores at Bellagio, MGM Grand, Mandalay Bay, The Mirage, Treasure Island, Monte Carlo, Circus Circus and Excalibur.

"Every retailer who is a good retailer is doing everything they can to get people in," Kizer said. "Retailers who never did (aggressive sales) traditionally are in the customer's face."

Despite the empty storefronts and deep discounts, it isn't all gloom and doom for the holidays.

A number of retail companies are posting increased earnings, or at least smaller losses, compared with the industry as a whole.

Wal-Mart Stores Inc. is the biggest, and perhaps the hardiest, of the group. The company opened a new Supercenter on Nov. 12 at 3075 E. Tropicana Ave. The 120,000-square-foot store is courting customers primarily with low prices.

Other retail companies that posted decent numbers in 2008 include Costco Wholesale Corp., which MSNBC reports is keeping above water largely due to brisk sales of cell phones and accessories.

Swedish fashion store H&M, which specializes in trendy but low-cost clothes and moved into Las Vegas in 2007, has minimized same-store sales decreases to about 2 percent per unit. Analysts consider same-store sales, or sales at stores open at least a year, to be a key indicator of a retailer's health.

The TJX Cos. Inc., which ows TJ Maxx and Marshalls, two discount fashion stores, managed to generate 1 percent same-store sales increases in the third quarter.

On a recent weekday, 52-year-old Robin Durain of Las Vegas, trolled the aisles of the new Las Vegas Wal-Mart looking for Christmas trinkets and small gifts.

Durain, who works part time for an insurance company, said she's aware the broader economic outlook is poor. But she is coping and doesn't plan to cut back, although she may alter her patterns.

"You can put it on layaway and pay for it each week or wait until the last minute to put it in your house," she said, echoing a common sentiment as newly credit-deprived consumers return to layaway as a form of purchase.

And it's a good bet retailers wish there were more consumers like Durain, a modest-yet-steady spender who isn't bowing to the economy this holiday season.

"I love Christmas," she said as she rummaged through a selection of NASCAR-themed tree ornaments in Wal-Mart. "After Christmas is over, I start shopping for Christmas next year."

Contact reporter Benjamin Spillman at bspillman@reviewjournal.com or 702-477-3861.

 

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