Retail convention likely to be a survival course

NEW YORK (Reuters) - Several months ago the National Retail Federation (NRF) chose "Inspiration" as a theme for its 2009 annual convention, to be held next week in New York. But now it seems "Survival" might have been a better choice.

As U.S. consumers grapple with a year-long slump, rising unemployment and falling home values, the retail industry is struggling to attract shoppers and preserve profits.

Major retailers, from Wal-Mart Stores Inc (WMT.N) to Macy's Inc (M.N), have cut their profit forecasts, trimmed staff or shuttered stores. Some, like Circuit City Stores Inc (CCTYQ.PK), have sought bankruptcy protection, and many more are seen as vulnerable this year.

The economy is "probably going to be the No. 1, 2 and 3 issue" at the convention, Tracy Mullin, the trade group's chief executive, said in an interview. "That's all anybody's going to be talking about, I guarantee you."

The retail industry's biggest trade show normally attracts several thousand retailers as well as vendors that sell them services like computing, staffing, consulting and security.

Citing the current climate, Mullin said fewer guests are paying full price to join the discussions and more seek only the free pass to the expo floor.

"We think we may be down slightly, but not by much," Mullin said of attendance, noting a desire of retailers to commiserate. "They like to share experiences and find out if there are actually people doing worse than they are."

The NRF will release its final 2008 sales figures and summary of the holiday season on Wednesday, but it will not issue a forecast for the current year at the show, as it usually does.

A spokesman said the convention falls a week earlier this year, and with the U.S. government issuing its December sales data on the last day of the show, there is not enough time.

"In this economy, we feel it is essential to have a better understanding of holiday performance before finalizing our 2009 economic forecast," an NRF spokeswoman said in an email, adding that the forecast will come out later this month.

The International Council of Shopping Centers, another trade group, said the 2008 holiday season showed the first decline in sales since it began tracking data in 1970. The NRF had forecast a rise of 2.2 percent in holiday sales in November.

LIFE SUPPORT

Howard Davidowitz, chairman of retail consultancy Howard Davidowitz & Assoc., said chain stores are now in survival mode. "You've got all these retailers on the cusp of bankruptcy. You've got hundreds of thousands of stores that could close. You've got shopping centers in collapse. You've got suppliers going out of business," Davidowitz said. "Retailing is on life support."

Analysts fear things will worsen before they improve, and investors have questioned whether the sector has hit bottom, with shares tracked by the Standard & Poor's Retail Index .RLX down 23 percent in the last 12 months.

"We continue to anticipate worsening trends in January now that gift-giving is over and maintain our cautious view on the group," said UBS retail analyst Roxanne Meyer in a research note on Friday.

Consumers have also grown accustomed to the steep discounts offered during the just-completed holiday season and may balk at paying full price in the future, which could force retailers to have to mark down even new merchandise.

"We are seeing a lot of deflationary pressure in the economy right now, and that means consumers are going to expect declining prices," said Ira Kalish, director of global economics at Deloitte Research and a presenter at the NRF convention. "It's not going to be a highly profitable environment for retailers regardless of what happens."

To survive the recession, Kalish said retailers must conserve cash, keep prices competitive and inventories low, and better understand consumers' wants.

NRF event highlights include a speech by Wal-Mart Chief Executive Lee Scott, in what may be his final public appearance before his planned retirement next month. Other speakers include senior-level executives from J.C. Penney Co Inc (JCP.N), Neiman Marcus Inc, Polo Ralph Lauren Corp (RL.N) and Lululemon Athletica Inc (LLL.TO).

(Reporting by Martinne Geller, editing by Gerald E. McCormick)