The retail industry appears to be skidding toward its first big wreck in 17 years.
Chains are slamming the brakes on store openings, cutting back on inventory and girding for leaner times as consumer spending chills. The speed with which sales slowed during the holidays caught even cautious retailers off-guard, prompting a flurry of profit warnings.
An expected 4% sales increase for the November-December holiday period at stores open at least a year rang in at only 3% compared with the 2006 holidays, according to trade group National Retail Federation -- the smallest increase since 2002. Even then, sales were propped up by inflation-boosted prices of food, fuel and drugs. Apparel, jewelry and home-products chains reported same-store sales declines.
It will be a discouraging first half of the year, economists warn. "It will feel like a recession to many people even if we technically avoid one," says Frank Badillo, senior economist at market researcher TNS Retail Forward. "Financial stress from high energy costs, the fallout from the housing slump and sluggish employment and income growth" will weigh on shoppers, projects Rosalind Wells, chief economist of the National Retail Federation.
This should surprise no one.
I'm traveling today. I'll probably write one or two more things as time permits