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Penny-pinching consumers hurting retailers? Not if the Bender family has anything to say about it.
On the Sunday before Labor Day, pharmacist Michael Bender took his wife, Marcia, and son, Matthew, to Gurnee Mills, a new, 2 million-square-foot outlet mall north of Chicago. Matthew, 14, had already gotten $500 worth of new clothes for school. Still, his mother wanted to "pick up some odds and ends." So she bought him a trendy-looking cotton shirt for $20. Is the recession cutting into back-to-school shopping? "You wouldn't know it here," said Michael Bender, surveying the estimated 100,000 shoppers who crowded the mall.
You wouldn't know it in a lot of places. While hardly booming, back-to-school sales are up. At Burlington Coat Factory, a discount chain that last year moved $790 million in apparel, Chairman Monroe G. Milstein says: "So far, we're ahead in the high single digits." At casual-wear purveyor Benetton, spokesman Peter Fressola notes: "Within the last two weeks, business has really picked up. Some of our stores are reporting double-digit increases."
Even at Abraham & Straus, a division of bankrupt Federated Department Stores Inc. based in Brooklyn, N. Y., "back-to-school sales are much better," says Senior Vice-President Francesco Cantarella. He adds: "We haven't seen any stuff that people look at and wonder, `When is that go customers. Consumers, many of whom a couple years back shopped just for the sport of it, have been making do with what they have--or, when they must lay out cash, they've been buying cheaper goods. Kay Cardenas, a Burlingame (Calif.) preschool teacher and mother of a sixth-grader, recently refused to shell out $50 for the Guess? jeans skirt her daughter coveted. "There was only a half-yard of denim in it," she says. "I explained to her that it wasn't a value."
Such frugality may leave some households glowing with virtue. But taken together, all those tight fists helped last year to throw the economy--two-thirds of which depends on consumer spending--into recession. With retail sales generally down about 3.5% so far this year, any gains over even 1990's spotty record will be welcome (chart). Nor could the improvement arrive at a better time: The back-to-school and Christmas seasons are pivotal periods when shoppers spend more money than the rest of the year combined. That's why economists were so heartened recently when R. H. Macy & Co. said it expects its sales to leap some 8% over the next six months.
Not every retailer is enjoying the surge. A spokesman at J. C. Penney Co. says back-to-school sales "have been disappointing." At Dayton Hudson Corp., President Stephen E. Watson reports recent sales are up a tad, but less than expected. He thinks some kids--including his own daughter--are waiting until they go back to school before they make their purchases. One more warning sign: Until consumers' incomes get growing again, any rebound in retailing necessarily will be dampened. "You can only draw on savings growth for so long to get spending growth," notes Carl Steidtmann, chief economist at retail consultants Management Horizons. "That's a limited string to push on."
That said, Steidtmann still expects consumers to start opening their wallets. "There is a lot of pent-up demand out there," he notes. "People didn't shop for a good 12 to 18 months, and eventually stuff wears out." Plus, a combination of events--easier credit, stabilizing home prices, lower energy bills, and rising stocks--seems to be fostering optimism. "There is a certain energy, a psychological thing, at the store level that hasn't been there in a long time," observes Benetton's Fressola.
Some stores plainly are doing better than others. Which ones? "The stores that offer value-oriented merchandise with really moderate prices are going to end up with the lion's share of the business," says Kurt Barnard, a retail consultant in New York. "The others will sit there with their tongues hanging out."
DOTS FINE. That's good news for the so-called off-price retailers that take name-brand remainders and discount them. At Boston-based T. J. Maxx, for instance, Hurricane Bob briefly dampened East Coast sales, but executives remain sanguine. "Off-pricers' results have been very favorable," says a spokeswoman. "We're well-positioned for the economy."
And those that aren't well-positioned are trying to get that way fast. Po Chan, a partner in Yountville Clothes for Children, a four-store chain in the San Francisco area, is buying fewer $100 European party dresses for infants these days. Instead, she's stocking up on domestically made dresses marked at $50 to $60.
Big department stores and chains are trying to catch consumers with inexpensive-but-trendy items. "What's doing well is less-serious-looking fashion," says Sarah Davies, corporate fashion director at Nordstrom Inc. "Anything too serious or too basic or too classic everyone is leaving behind, because they already have it in their closets." At Abraham & Straus, shoppers are grabbing most any garment covered with dots, says Cantarella: "Big dots, small dots, there is a lot of excitement about dots this year." Wild colors also remain hot: At Gurnee Mills, a kiosk called Originals is selling lots of $14.95 T-shirts. They look like `60s-era tie-dye shirts, but the colors change when something warm--a hand, or hot breath--comes in contact with them.
At K mart, "skeggings"--skirts with leggings attached--are going fast. Also big hits at K mart: the Lisa Frank line of very feminine-looking school supplies aimed at little girls, and Elmer's Glucolors--glue in neon pink, green, yellow, orange, and blue. Wal-Mart shoppers are snapping up small coolers, backpacks, and lunch kits in bright colors. Near colleges, Wal-Mart is winning with Bed in a Bag, a comforter-and-sheet set.
While consumers hold off on those $100 baby dresses, many still are hot for bargains. "My spending is up 20%, but I'm buying because I have to," says San Francisco physician Ellen Howse. She recently purchased a new refrigerator and a Mazda minivan, feeling she got good deals on both. That's the spirit retailers are counting on to carry them into 1992.Laura Zinn in New York and Julia Flynn Siler in Chicago, with Alice Z. Cuneo in San Francisco, and bureau reports