Will oil slump sap energy from holiday shopping?
Retailers remain upbeat despite local uncertainty
Retailers should finish the holiday shopping season safely in the black.
That’s the national forecast, at least, and Houston may be no exception. But there remains a big unknown over how much the oil slump will affect consumers in the world’s energy capital.
While acknowledging that conditions heading into the holidays are slightly less cheery than in 2014, longtime observers of the local economy say there are enough signs of strength to suggest retail sales won’t tank.
“Some people are nervous and concerned, but no one’s panicked yet,” said Patrick Jankowski, senior vice president of research at the Greater
Houston Partnership.
Houston retailers feel like they’ll closely follow the national trend, added Ed Wulfe, an established Houston developer and chairman and CEO of real estate brokerage firm Wulfe & Co. The chatter he’s hearing suggests they expect 3 to 4 percent growth over 2014.
That would be in line with national forecasts, which so far have found retailers entering the season largely upbeat. The National Retail Federation’s forecast calls for sales to increase 3.7 percent. Though slightly less than last year’s growth rate, that’s still a “solid” figure, according to the NRF.
The International Council of Shopping Centers calls for a 3.3 percent sales increase, with shoppers spending $702 on average, up from $677 in 2014.
In a survey of retailers large and small across the country, retail and consumer consulting firm BDO USA reported 61 percent expect sales to rise over last year. BDO predicted overall sales growth of 4.2 percent for this season.
“What we’ve seen over the last several years coming out of the recession is this steady, cautious growth,” said Ted Vaughan, an accountant and partner with BDO.
Nationally, retailers told BDO that lower employment and lower energy prices will be among the main drivers helping sales this year.
A chilling effect
Yet in Houston, the prolonged dip in crude oil prices that chilled oil field and related activity and claimed perhaps tens of thousands of jobs could depress some shoppers’ moods this season.
The job cuts hit blue-collar energy workers hardest and are now beginning to affect white-collar workers.
Though other sectors have added some new jobs, they aren’t making up for the energy losses in number or in pay levels, Jankowski said.
Even the threat of a job loss breeds uncertainty.
“Uncertainty will put a damper on high-ticket items,” said Partha Krishnamurthy, a professor at the University of Houston’s Bauer College of Business.
Fretful consumers tend to shy away from luxury goods and large purchases that require multiple payments — home items or cars, for example. Discounters and big-box retailers tend to pick up more consumers when they become uncertain about their finances, Krishnamurthy said.
Sid Mashburn, CEO of a company that operates high-end clothing stores at Lamar-River Oaks Shopping Center on Westheimer and counts many energy-connected customers among his clientele, said he has yet to a see a dropoff in Houston.
Mashburn, whose company is based in Atlanta and has stores there and in Washington, D.C., said he remains confident about Houston, “although if the energy slump continues to drag out over an extended period, we will certainly reassess our position.”
“It’s our judgment that retailers who are not offering a truly special shopping experience and strong value proposition are going to have a tougher time,” he said.
Constina McIntyre, who counted many Shell employees among the clientele of her women’s clothing and accessories boutique in Stafford, said she is feeling the oil crunch. While business has been better this year than the past four, she has yet to see any holiday upturn.
“A lot of my customers are pulling back,” McIntyre said, adding that she still expects people to get in the shopping mood. “I think it’s going to be a rush toward the last minute.”
Signs of hope
Observers point to other hopeful signs. Parker Harvey, senior regional economist with the Houston-Galveston Area Council, cited population growth that drives demand for retail. Although that growth has slowed somewhat, it could still nudge the region to a successful holiday shopping season, he said.
Then there are home and vehicle sales, which remain strong. The latest data show auto sales continuing to surge ahead of 2014, which was considered a banner year for the Houston area.
“Most rational consumers will not sign a four-, five-, six-year note on an automobile if they don’t have the confidence they’ll be able to make the payments,” Jankowski said, adding that the still-strong home sales suggest longterm consumer confidence.
Wulfe, the retail developer, also expects online growth and more home delivery or in-store pickup options from companies like Amazon, Target and others to further boost sales.
Shopper habits
Still, the deep recession that began nearly a decade ago casts a long shadow. Consumers remain cautious and continue the habits they formed during that national downturn, Vaughan said.
Today’s shopper increasingly expects discounts, will wait for the best sales before purchasing and perhaps buy fewer, more meaningful items for those on their list, Vaughan said.
This trend has persisted through times of high consumer confidence and is most pronounced among younger people who grew up during the recession, he said.
Another adjustment has been the longer shopping period, as consumers spread out their shopping to ease the strain on budgets.
“Actually, in October, we had a lot of people stopping through getting their shopping for Christmas,” said Nikola Charpentier, manager at Eddie Bauer at Houston Premium Outlets, adding some of the activity was people wanting to avoid the rush and pouncing on early discounts.
In her 20 years in retail, general shopping activity seems to be running about normal for the early-season period, Charpentier said.
Conn’s CEO Norman Miller said that as of the first week of November, the company has “already started to see a tick up” in sales, and the company is preparing “aggressive” promotions through the season to keep the activity level up.
Yet the traditional rush period retains a powerful pull.
“I’ll start shopping the week after Thanksgiving,” said Patricia Mays of Houston, who said she will buy for nieces and nephews, ages 5 to 38, and finds the post-Thanksgiving crowds more manageable.
“I might spend a little more, but we’re bargain shoppers,” Mays said, adding that she occasionally may shop Black Friday if a deal is too good to miss.
Tony Dasher, a financial analyst with a major oil company, said he’s not yet conducting himself any differently than a normal year. But he already was spreading out holiday purchases throughout the year. Plus, as a 15-year veteran of the oil industry, he’s aware of its cyclical nature.
“It’s just something that’s out of your control,” Dasher said. “The only thing you can do is do your job.”
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