Even As Holiday Sales Increase, Retailers Worry

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Holiday shoppers i

Target shoppers look for Black Friday deals in Los Angeles last month. Even as retail sales and hiring are up, retailers are still unsure about shoppers' moods this holiday season. Krista Kennell/Sipa Press/AP hide caption

itoggle caption Krista Kennell/Sipa Press/AP
Holiday shoppers

Target shoppers look for Black Friday deals in Los Angeles last month. Even as retail sales and hiring are up, retailers are still unsure about shoppers' moods this holiday season.

Krista Kennell/Sipa Press/AP

Retail hiring is up this holiday season, at least compared with last year. And numbers released this week show that retail sales rose in November, too. But in spite of the good news, merchants remain worried about holiday shopping — they still can't get a read on the mood of their customers.

Dexter Howell of GreenPets, an all-natural and organic pet store in Washington, D.C., has a bleak outlook for the holiday season, even though his store added two seasonal employees.

"No one's real bright about the future after Christmas," Howell says. "I don't think anyone sees things changing in the next six months. I really don't."

Reason To Celebrate?

The retail data suggest Howell shouldn't be quite so gloomy.

The Labor Department says store hiring in November was up more than a third over last year, when the U.S. economy seemed to be heading toward collapse.

And November's retail sales were up 1.3 percent, according to the Commerce Department. A lot of that growth came from car and gasoline sales, but even without those, sales were up slightly.

Still, analysts say they understand retailers' wariness as they come out of this brutal recession. Retailers are hoping for good news, but they know their customers have taken a beating.

Nigel Gault, a retail analyst with the forecasting firm IHS Global Insight, says this recession's recovery will be a bit different from ones before it.

"Particularly for the retail sector, [it] will be one where confidence only comes back very gradually, and more gradually than in the past," he says.

Merchants hope their customers will suddenly open their wallets, he says, and consumers hope the stores will slash prices even more.

"We do at the moment have a little bit of a game of chicken, where the consumers are holding out for bigger discounts, and the retailers are hoping that the consumers are going to come back and start spending before they have to put in the huge discounts," Gault says. "And clearly the middle part of December that we're entering right now is going to be critical."

No Holiday Cheer

This time may be critical, but it's not a very merry one. Stressed-out retailers, like Steve Cohen of Lane's Luggage, say their bargain-hungry customers just aren't that much fun.

"They're not happy," Cohen says. "I mean, normally during Christmastime people are happy and laughing and joking. And even last year I noticed — around Christmas, people usually come in from parties and they've had a little bit to drink, and they're having a ball. That didn't exist last year — and it certainly hasn't started this year."

Cohen is so worried about customers holding back that he has cut hours for his staff of five. He also has decreased inventory. But he is trying to remain optimistic.

"I'm hopeful," Cohen says. "I just don't know anymore. I can't predict who's going to come through our door and what they want."

Who walks through that door this weekend and next could well determine whether this holiday season sets up a retail rebound in 2010.

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