After November Decline, Holidays Provide Late Boost

By Beacon Staff

Like virtually every other economic indicator out there, the national retail sales figures emerging from the holiday season are bleak. Most major stores won’t report their December sales data until Jan. 8, but in the days following Christmas a steady stream of consumer research firms have released findings indicating sluggish holiday sales as the national recession, rising unemployment and stock market losses have taken their toll on holiday shoppers.

Retail research firm ShopperTrak released a preliminary report last week indicating consumer foot traffic for Christmas week dropped 4.7 percent from the same period in 2007. According to that same report, traffic for the entire holiday season dropped by 16 percent, and retail sales declined 2.3 percent.

Other reports on the retail holiday season are even less optimistic, with many analysts predicting sales will have dropped at their steepest rate since 2003, and that retailer earnings for the fourth quarter of 2008 are likely to tank.

But while Montana seems to have weathered the recession with relative strength so far, how did retailers fare in the Flathead, an area that has borne the brunt of the layoffs and housing declines beginning to plague the state? The answer, like so many facets of this economic downturn, is complicated.

Most Flathead retailers interviewed said they saw their sales decline over last year’s holiday season, though responses differed as to how much. And while most national retailers depend on the holidays for anywhere from 30 percent to 50 percent of their sales, for most Flathead merchants, the summer tourist season is where they see their biggest sales – not in December.

That’s one advantage for local merchants, but the relatively late onset of the recession into the region meant many purchased their inventory during the summer or even earlier in 2008 – leaving them with a surplus of merchandise on hand when spending slowed in the fall. And every retailer agreed that Flathead consumers put off their holiday shopping until the final weeks before Christmas, making for a scary November and early December.

“It started late,” said Wandee Milstead, owner of Savannah’s Boutique, a high-end clothing store in Whitefish. “We didn’t get busy until three to four days before Christmas.”

Like other local retailers, Milstead attributed part of that to a late snowfall that didn’t seem to get shoppers into the holiday mindset until relatively late. The last few weeks of brisk sales have almost made up for the slow fall, she said, but she’s also adjusting the items she carries to accommodate the many shoppers unwilling to spend as much on the more expensive articles of clothing in the store.

“People are much more likely to buy something for $50 to $80,” Milstead added. “Once we pushed it up to $200, the merchandise did not move.”

At another high-end clothing store, Whitefish’s Fifty Seven Boutique, owner Cindy Hale was buoyed by a strong summer, but said sales dropped “quite a bit” in the fall and over the holidays.

“We figured that was going to happen,” Hale said. “In September, things started slowing way down.”

Hale said jeans are selling well, and while she is offering deep discounts on accessories, denim might just be recession-proof.

“People are really into the sales, but they’ll still spend the money for something higher-end if that’s what they want,” Hale added. “I have kind of a surplus on things so we just need to move them.”

Like some of those smaller independent retailers, Dave Harvey, the vice president and general manager of the Sportsman & Ski Haus said the sporting goods dealer had a strong summer followed by a brutal fall.

“We didn’t get hit by that until November 1,” Harvey said. “We’ve never really seen business decelerate like that.”

He chalked the decline up to a “triple whammy” of conditions: Canadian currency, which accounts for a good chunk of their sales, grew weaker against the dollar; broad economic uncertainty; and a late snowfall that didn’t get people fired up for winter sports until almost mid-December. But since then, he said, business has been “going crazy.”

“We matched or exceeded some days of last year’s sales, which for us was a victory,” Harvey said.

And for all the merchants in the valley, the outlook for 2009 is difficult to predict.

“It’s a balancing act for retailers – matching inventory to sales,” he added. “Smart retailers are being pretty conservative with their guesses right now.”

But one area retailer found itself particularly well-suited to weather the economic downturn over the holidays: At the Imagination Station toy stores in Kalispell and Whitefish, co-owner Denise Magstadt said they have been “slammed.”

“We’re lucky because we’re a toy store and people don’t leave out their kids for Christmas,” Magstadt said. “We still are the birthday store, still here for (age) 15 and under gifts.”

She’s making changes to her purchasing for the coming year, but believes the Flathead economy will pull through the recession and come out strong on the other side.

“We’re going to keep a positive outlook,” Magstadt said. “We’re adjusting buying figures but we’re not thinking we’re going to be as grim as the rest of the country.”