Consumers, economy crimp U.S. retail store plans
NEW YORK (Reuters) - The consumer spending slowdown that began in 2007 is turning into a new store slowdown in 2008.
As many U.S. retail chains prepare to end their fiscal year on Thursday, they are already ratcheting back expansion plans for their next fiscal year, realizing the rocky economy and a cash-strapped consumer will no longer support heady store opening plans.
On Wednesday, Starbucks Corp (SBUX.O) said it would close 100 underperforming U.S. stores and slow domestic openings in the face of a likely consumer recession, while AnnTaylor Stores Corp (ANN.N) said it would close 117 stores and also delay until next year the launch of its new store concept.
On Thursday, department store operator J.C. Penney Co Inc (JCP.N) joined the chorus, saying it might cut 10 or more of the 50 stores it planned to open each year in 2008 and 2009.
"In 2008, we're planning more conservatively," J.C. Penney spokeswoman Darcie Brossart said.
Conservative may be the name of the game for retailers in 2008. As the housing market boom propped up consumer spending, retailers rushed to boost store opening plans or introduce offshoot brands to take advantage of flush shoppers.
But the deteriorating housing market of the past year has put a chill on consumer sentiment and spending. U.S. holiday sales rose at their slowest in five years and 2008 retail sales are forecast to increase at their lowest level in six years, according to the National Retail Federation.
Meanwhile, the Commerce Department said on Thursday that consumer spending edged up by just 0.2 percent in December, which is supposed to be a busy holiday shopping month, after a 1 percent gain in November.
The lackluster consumer spending has sent many retailers scurrying to scale back expansion plans, mull store closing and lower Wall Street's expectations in what may be a tough year.
"This is going to be the year when the retailers look upon themselves and say: 'Hey, I can change the growth plan that I put there right now because the Street will accept it'," said Marshal Cohen, chief industry analyst at NPD Group.
At the National Retail Federation's conference earlier this month, JP Morgan analyst Brian Tunick, who covers publicly traded specialty retailers, said about 25,000 new stores were opened in that sector between 2000 and 2007.
"There's a lot of (retailers) out there that are over- stored right now," he said, and will need to trim their expansion plans.
Already this calendar year, apparel retailer Talbots Inc (TLB.N) has said it will exit its Talbots Kids and Mens lines, while Pacific Sunwear of California Inc (PSUN.O) said it will close its struggling chain of 154 demo stores, which sell urban inspired clothing.
Patricia Edwards, a managing director at Wentworth, Hauser and Violich, who covers retail stocks, said she expected retailers such as Chico's FAS Inc (CHS.N) and Coldwater Creek Inc (CWTR.O), that cater to women over 35 and are facing an industry-wide sales slump, to reduce expansion plans.
NAVIGATING THE DOWNTURN Continued...
