Retail Sales in Wartime: They Nest

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A sluggish start to the shopping season

In a U.S. economy in which consumer spending accounts for two-thirds of all economic activity and holiday sales account for as much as half of retailers' annual revenues, the Christmas retail season is always a hot topic for economy-watchers — especially in a recession whose level of pain may depend on the outcome. But the unifying echoes of Sept. 11 allow for a little pop psychoanalysis too. In a nation of people known for expressing themselves by what — and how much — they buy, what are folks thinking this year?

The early overall mood isn't exactly ebullient. Instinet Research said Tuesday its Redbook Retail Sales Average is down 4.6 percent for the first two weeks of December, with discount and department stores both reporting lower sales growth than in the first week of the month. And while the report insists "sales growth is expected to be the strongest in the next two weeks as consumers continue to delay purchases close to Christmas," that could be wishful thinking. The Bank of Tokyo-Mitsubishi and UBS Warburg also found last week's sales off 0.5 percent from the week before, and projects just a flat-to-1 percent increase from last year's sales. That ain't good.

The economy being what it is — and has been all year — discount stores, as expected, are faring a bit better than their glitzier competitors. Wal-Mart reported in its weekly sales update Tuesday that while it was "below plan" for the season so far, December sales should still post a 4 percent hike. Meanwhile, Federated Department stores said that sales for the month would be down 11-14 percent. And it's worse in New York City, where sales at some major midtown stores — like Federated's flagship, Macy's, and Bloomingdale's — are down 20 to 30 percent as the city deals with a steep falloff in traditionally profligate international tourists.

And yet sales at the new Pokemon store in Times Square are 7-10 percent above projections. One bit of post-Sept. 11 pychoanalysis had it that shell-shocked Americans would decide they could do without the latest in technological wizardry for another year. But just as Hollywood boomed during the Depression and WWII, the economic front of America's new war is not all casualties, and this time the winners look to be those selling escapism for the living room.

DVDs and DVD players, digital television sets, digital cameras, the X-Box and the new Nintendo, and all the games that go with them — all hot gift items this year. Consumer electronics retailer Best Buy fueled a Wall Street rally Tuesday with the news that it had beaten third-quarter expectations and expects Christmas sales to be "above plan." Even struggling Circuit City posted a better-than-expected profit after losing 32 cents a share last year — a turnaround which wouldn't have happened without some brisk holiday sales.

Part of this has been a happy coincidence of product cycles and falling prices, particularly in DVD players and digital cameras. But the trend, analysts say, seems emotional too. The war on terrorism hasn't physically affected many people's lives. There are no Rosie the Riveters this time around, no rationing (just the opposite: everything's on sale). The World Trade Center and the Pentagon, the anthrax scares, Tom Ridge's terrorism alerts about "dirty bombs" and biological attacks — they've given people lots of new stuff — and new enemies — to worry about, but no real reason not to shop.

Call it the nest defense. Americans are flying less, going to Disneyland less and mailing fewer letters. But if they've got jobs, they've still got money — and they're spending it on the things that will give them less reason to leave the house. Consumer electronics have always been big sellers during the holidays (nothing like family gatherings to inspire the buying of anti-conversational devices) but this year they're some of the only big sellers, and if this wartime recession is relatively painless and relatively short, we may have a new generation of couch potatoes to thank for it.