Valley Stores Recording Modest Increases Over First Half of Last Year Other Valley-based companies may be reporting lower-than-expected earnings for the first two quarters, but local shopping centers and their tenants say retail sales have exceeded comparable 2000 figures and they remain “cautiously optimistic” headed into the second half of the year. Although some retailers are reporting only modest increases over last year at this time as little as 2 percent they will settle for it. Throughout the Valley, increases in sales for the first six months of this year compared to last range from 1.2 percent to as much as 8 percent. The national average as of May 1 is 1.4 percent, according to the U.S. Census Bureau. But the numbers get even higher when you factor in figures from new or newly remodeled stores. So, although other business sectors are suffering and there have been some layoffs in the Valley as a result of the weak economy, the slump has not eroded consumer confidence. And, based on retailers’ expectations for the third and fourth quarters, there is little indication retailers believe shoppers will stop reaching for their wallets. “With the exception of maybe Disney (4,000 workers worldwide have received pink slips since January) and some other companies, there really have not been the kinds of big layoffs here in Southern California or the Valley that we are seeing in the northern part of the state and the rest of the country,” said Jack Kyser, chief economist for the Los Angeles Economic Development Corp. “So yes, there is still a strong level of confidence out there and we are seeing this not only in retail, but also the housing market and with automobile sales.” In addition to retail sales increases, mall representatives say leasing activity for the year so far remains brisk even though some leasing agents may have put a momentary hold on expansion plans. Although second-quarter revenues have not been tallied, comparable store sales figures through the end of May were up 6 percent at the Northridge Fashion Center. Several new stores, including top performers like GAP Body, have opened since January and, according to Joey Char, the mall’s marketing director, plugging in their numbers would push year-to-date figures up 13 percent over last year. “We are having a good year and we are cautiously optimistic that this trend is going to stick with us for the remainder of the year,” said Char. Here’s another indicator: foot traffic. Char said that, through the end of June, 10.7 million people visited the mall, up 11 percent from 9.6 million for the same period in 2000. The mall is projecting a 97-percent occupancy rate through year’s end, up from 93 percent in 2000. At the Sherman Oaks Fashion Square, average comparable store sales were up 1.5 percent over 2000. But those figures do not include sales from high-volume stores such as GAP, which reopened this year as GAP Body, and Coldwater Creek, an apparel and accessory specialty store which opened in June. Several stores are planning openings or expansions by year’s end. Victoria’s Secret is moving from a 4,880-square-foot space to a 9,728-square-foot space. jjill, also an apparel store, will lease out Victoria’s Secret’s old space sometime in late October and jcrew is scheduled to open in August in a 6,000 square-foot space. Fashion Square general manager Ruth Tewalt said, while retailers are doing well amidst the economic slowdown, she has seen indications that some are taking a wait-and-see approach before making expansion plans for 2002. “The read I’m getting from leasing representatives is retailers are feeling cautious, and I think a lot of them are probably sitting tight right now,” said Tewalt. “If the economy really picks up in the third and fourth quarter, they will likely pick up for the next year. But right now you almost need a crystal ball to know what’s going on.” Jackie Fernandez, an analyst with Deloitte and Touche in Los Angles, said consumer confidence may be high, but so is consumer debt. According to the Census Bureau’s report, the percentage of disposable personal income tied up by consumer debt as of June 22 is 21.9 percent, compared to 21.5 percent for the previous year. As a result, increases in consumer spending are equally difficult to predict. “Consumer debt is at an all-time high, so it’s possible that no spending increases will come in the third or fourth quarters,” said Fernandez. Fernandez agreed retailers are showing some signs of holding off on new contracts, particularly prospective anchor store tenants. She also thinks retailers have drawn from their experiences during the last recession of the 1990s and keeping a closer eye on inventories and consumer trends. But she also said that, as bad as the 2000 Christmas shopping season may have been for most retailers, there is plenty of reason for optimism, cautious as it may be. “I’m not sure we are close to the situation we were in during the 1990s, but we are seeing vacancies around anchors and that’s the last thing you want to see happen,” said Hernandez. While many retailers are reporting sales increases over 2000, that doesn’t mean they are immune from factors affecting all businesses, particularly energy costs and higher workers compensation fees. “I’m in full agreement with the retailers here about sales,” said Fred Levine, owner of M. Frederic. “We are up about 11 percent for the first two quarters, and that’s considerable,” said Levine. Four of his 18 stores are in the Valley, but two of them, and his company’s warehouse, are in Southern California Edison country, where they are not only prone to rolling blackouts, but have also been hit by increased electricity bills. So, while sales are up, earnings have been flattened to some degree by increases in overhead. “It’s the price we pay for increased volume, but the fact that it’s keeping us on pace means we are on track and I’m optimistic about the third and fourth quarters,” said Levine. Janine Baker, marketing director for the Westfield Shoppingtown Topanga, said mid-year sales for the center are trending upward although she said the parent company, Australian-based Westfield Holdings, which is publicly traded, won’t release figures for specific facilities. She said promotional campaigns, such as the recent rollout of the Westfield cash card, have helped foot traffic, although it’s hard to be sure since the center does not have a traffic counter. “Obviously, we are being very strategic about promotions, especially as we head into the holidays,” she said. Denise Romance, owner of Jay’s Luggage, at Westfield Topanga since the mid-1980s, said she considered pulling back on advertising this year because of the threat of a full-scale recession. That recession has not materialized so far. Instead she is reporting increases in sales of between 2 and 3 percent, and she recently mailed out an annual holiday catalogue to 350,000 households. She said she even hired additional staff for summer. “When we started hearing about all the doom and gloom we thought maybe we would not do (the catalogue) this year, but we are because we see increases,” said Romance. “It may not seem like a lot, but to me it’s great, and we are heading into the next two quarters feeling very optimistic.” The long-awaited expansion of the Westfield Shoppingtown Promenade just a few blocks away will wrap up this fall. Newcomers include Barnes & Noble Books & Caf & #233;, Chick’s Sporting Goods and Total Woman Gym & Day Spa. “The fact that these retailers are coming in is testimony to the level of confidence they have in our centers and in the economy in general,” said Baker.