Who Let the Grinch Out?

A movie about The Grinch was the box office champ of the 2000 Christmas season.

It's been 53 years since The Miracle on 34th Street. Our holiday movies have since become increasingly cynical. (Think Scrooged — Silent Night, Evil Night — Ernest Saves Christmas.) And now The Grinch.

Someone or something did steal Christmas from retailers. With apologies to the Righteous Brothers, we lost that shoppin'feeling. Of course, it's the classic self-fulfilling prophesy: If people feel we're heading into a recession, they'll spend less. And that will lead to a recession.

Recession? George Will doesn't think so. The syndicated columnist wrote that holiday sales were still up from 1999, “and that was the best Christmas in a decade.”

Judy Bell agrees. The industry's bright visual light (with a new book coming out) expects the January interest rate cut will lead to “continued real income growth, energy price deflation and continued sales growth over the next one to three years.”

Office Depot's January announcement that it would be closing 70 stores and pumping $110 million into “sprucing up” many of its 818 surviving locations might indicate what the industry will be emphasizing: doing whatever it takes to remain competitive.

“We think that most large retailers with rollout type work will continue,” says Craig Hale, program manager for the retail division of planning/architecture firm Carter Burgess (Ft. Worth, Texas). “They need to, or they'll fall behind their competition.”

Not everyone is quite so sanguine. “The worst is yet to come,” warns Steven K. Platt, the retail business guru from Hinsdale, Ill. “The first quarter is an already slow period for retail. The second and third quarters will be bad, as well, because unemployment will start inching up.”

“This expansion has gone on for nine years,” said Marie Menendez, senior credit officer at Moody's. “Anyone who has used these boom times to grow square footage but did not produce comparable productivity gains will have difficult times in the months ahead.”

Did someone say “overstoring”? Any economic downturn can be hurtful to our industry because when retailers want to cut costs, expansion and renovation are frequently first to be trimmed. But don't give up entirely.

“I weathered a recession at the start of my career in London,” says Christian Davies of Fitch. “The High Street retailers who maintained their pace throughout really cleaned up when things began to turn around, while the rest scrabbled to slap a new store design together.”

“It's not as though there is still not a tremendous amount of wealth,” notes Ignaz Gorischek of Neiman Marcus. “The question is, how do you get the customer to spend or invest it wisely? You didn't have to be a retail genius to make money in the past few years. Now is when we will truly earn our salaries. We will have to be strategic, plan realistic goals and use this downturn to separate ourselves from others. It's a perfect time to trim the fat.”

The fat's in the fire. Is the fire in your belly?