By Kathleen Dayton
Staff Writer

“Modest,” “challenging,” and “conservative” are some of the words retail analysts are using to describe the upcoming holiday season as retailers enter the fourth quarter, traditionally their busiest season of the year.

The 2007 holidays are approaching with consumers in the midst of a difficult economic environment, complete with a housing market slump, tighter credit lending practices, higher food and gas prices and modest income gains.

“Retailers are in for a somewhat challenging holiday season as consumers are faced with numerous economic obstacles,” said Rosalind Wells, chief economist for the National Retail Federation.

The organization is predicting a 4% gain in retail sales for the November-December period, compared with a forecast of 5% at the same time last year. Actual 2006 sales came in at 4.6% above the same period the year before.

Susan McWaters, district manager for Belk department stores, said she is still optimistic for the fourth quarter.

“I think right now business is being affected by the weather,” McWaters said. “This time last year, it was much cooler.”

McWaters thinks consumers will be more practical in their buying habits this year and that there will be fewer impulse purchases than in years past. She also predicts they will shop locally as opposed to taking shopping trips to nearby metropolitan areas such as Atlanta.

“I think they’ll stay home, and they’re finding ways to pinch their pennies to make the holidays enjoyable,” McWaters said.

Neil Coker, manager of Reed’s Jewelers at Northwoods Mall, is also optimistic and forecasts that consumers will give in and spend more freely as it gets closer to the holidays

“People are trying to open up lines of credit and things like that,” Coker said. “They’re getting prepared. If you want my opinion, they’ll use credit to live up to their status quo.”

Britt Beemer, president and chief executive of America’s Research Group, a Charleston-based consumer research firm and trends analyst, has a less exuberant take on the remainder of the fourth quarter.

Beemer, whose statistics are based on comparative retail store sales, or stores open at least a year, think sales will rise only 1.8% to 1.9%. In addition to economic strains on consumers that are keeping them from opening their wallets, Beemer said there is no must-have item this year driving consumers to store shelves.

“There’s nothing out there to buy,” Beemer said. “It’s really one of those years where we could be in negative territory.”

Beemer said there is pressure on consumers today that wasn’t there before.

“Consumers tell us their mortgage payments have gone up $200, $300 (a month) because either their insurance or their property taxes went up,” Beemer said. “Consumers tell us groceries have gone up $20 a week, and then there’s gas prices. All these things play a role.”

Leigh Burnett, marketing director for Citadel Mall, said it is too early for her to make a prediction on holiday sales or fourth-quarter results.

“You never know with the fourth quarter,” Burnett said. “You can predict all you want and you don’t really see until somewhere in December how it’s all going to end. It can go either way. You can start off dismal and turn great, or vice versa.”

Burnett said the tax-free weekend held in the state last November just as holiday shopping was starting was a big sales incentive. This year, the state only held one tax-free weekend, the August back-to-school event.

Anika Khan, an economist with Wachovia Bank, said she is forecasting holiday sales at about 4.5% to 5% for the November-December period, slightly higher than National Retail Federation predictions.

“We feel like retail sales will continue to be strong,” Khan said. “It’s going to be a little lower than last year, but the consumer is moderating. Food and energy costs are going to constrain the consumer a bit, but overall, the consumer always spends during the holiday season.”

Kathleen Dayton is a staff writer for the Business Journal. E-mail her at kdayton@setcommedia.com.

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