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Stores avoid the worst, look for 2002 rebound Michigan retailers approached the 2001 holiday
season with the lowest expectations in years, but the results indicate
the season avoided any anticipated disaster. The state's retailers averaged a 3.3-percent
growth in holiday sales, according to the Michigan Retail Index. Forty-five
percent of respondents said their sales were up from last year. That's a definite improvement from the
2000 season, when sales growth averaged 0.0 percent and only 25 percent
of retailers topped the previous year. "Last Christmas, many retailers were
caught by surprise when the robust sales of the previous few years didn't
materialize," said Larry Meyer, MRA chairman and CEO. "This
year, their expectations were lower, and many of them feel good about
a small increase over the previous year. Even so, many stores rang up
respectable growth." National estimates of the increase in December
sales at major retail chains range as high as 4.5 percent. The International
Council of Shopping Centers reported that sales for the November 23 to
December 24 period were up 2.1 percent at mall specialty stores. In November, 43 percent of Michigan Retail
Index respondents reported increased sales from a year ago - a continued
improvement from their dismal performance in September. The Index is a
joint project of the Michigan Retailers Association and the Federal Reserve
Bank of Chicago and is based on a monthly survey of MRA members. Home furnishings and home entertainment products
saw some of the strongest sales during the holidays, most likely due to
an increased emphasis on home and family after the September 11 terrorist
attacks. Jim Schwark, president of Schwark Furniture
in metro Detroit and a member of the MRA Board of Directors, said December
sales at his four stores were up from last year, after several months
of weaker sales. "The coming year is expected to be a
good one for furniture because of strong housing sales in 2001,"he
said. Gift retailers also performed well, according
to the Index, while apparel sellers fared the worst. To reduce costs going into what many retailers
believe will be a slow 1st Quarter, nearly half of Michigan retailers
expect to operate with leaner inventories in early 2002. Forty-nine percent said they planned to reduce
inventories for the next three months (December-February) compared to
the same period last year, according to the November Michigan Retail Index.
The percentage of retailers planning to reduce inventory levels was the
highest since the Index was established in 1994. "Retailers are understandably cautious
entering the new year," Meyer said. "Their caution reflects
slower sales throughout 2001 and projections for continued economic weakness
in the first few months of 2002." In contrast with many national retailers,
whose profits may be hurt by the intense discounting during the holidays,
those who have taken steps to reduce costs and keep inventory under control
have often been able to preserve or even increase profit margins. Barb Stein, also an MRA board member and
owner of Great Northern Trading Co. in Rockford, has been reducing inventory
all year at her gift store due to soft sales. A strong finish during the
holidays left her with little excess merchandise to mark down after Christmas. "We got rid of everything at regular
price," she said. Still, she plans to keep a tight rein on
her buying at gift shows in January, expecting slower sales during the
beginning of the year. Most retailers and economists are looking
for an economic rebound no later than mid-2002, and perhaps as early as
March. David Littmann, chief economist for Comerica
Bank, noted a number of positive trends in a December speech to the Economic
Club of Greater Lansing, including low energy prices and an upswing in
the stock market. Government stimulus measures, such as interest rate
cuts and tax cuts, will leave more money in consumers' pockets, boosting
spending. Littmann said the economy has passed the
weakest point in the mild recession, which began in March, and is ready
for recovery. "I see a very healthy and lengthy economic expansion immediately ahead," he said.
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