a barometer for anxious retailers

As Midlands shoppers tally up how much they've saved during this weekend's tax-free shopping holiday, retailers will be doing some tallying of their own.

Tax-free weekend is more than a sales event. It's the kick-off to the critical retail season that runs through Christmas.

How well back-to-school sales go may signal the strength or weakness of the rest of the year, many retailers and experts say.

"The second half of the year is really the best for retailers, and back to school really kicks it off," said Rich Davis, store manager of J.C. Penney in Columbia Place.

Ellen Tolley, spokeswoman for National Retail Federation, an industry trade group, said how well stores do during back-to-school often carries over through the holiday season.

"It can be a decent indicator of what's in store for the rest of the year," Tolley said. "It helps establish consumers' mentality."

Consumer spending is important because it makes up two-thirds of the nation's economy. And the end-of-the-year shopping season is important for employment, as retailers beef up their staffs to serve holiday shoppers.

In a recent National Retail Federation survey, families with school-aged children said they would spend an average of $450.76 on back-to-school items, up from $441.60 in 2002.

The trade group has a fairly optimistic outlook for the rest of the year, too, predicting retail sales will show 4.5 percent growth over last year. That is much more stronger than the first half of the year's performance, when sales grew 2.2 percent over the previous year.

"We're looking at some significant growth over the start of the year, which was plagued by war with Iraq, the sluggish economy and national-security threats," Tolley said.

When consumers get into a mindset of saving and stocking up on necessities, they don't spend as much, she said.

National-security threats may not weigh on shoppers' mind as heavily now as at the beginning of the year, when people were buying duct tape and plastic sheeting out of fear of terrorism.

But now there are domestic issues that some say could keep shoppers reluctant to spend.

Deborah Fowler, director of USC's Center for Retailing, said the high unemployment rate doesn't instill a lot of confidence in consumers: "When people are worried about their jobs, nothing else matters."

Last month, the Consumer Confidence Index dropped seven points to 76.6, partly because of concern about the labor market, according to the Consumer Conference Board's survey.

Davis of J.C. Penney said he's noticed consumers' hesitance to part with their cash. "Until this point, there has been a lot of apprehension about spending money," Davis said. "I think customers are a little skittish about making purchases."

Fowler said she thinks some people will put off back-to-school spending to save money, especially if they can make their summer apparel last a couple more months.

"I think really when we are going to see back-to-school sales (purchases) is in mid-to-late November," she said.

Davis said that these people tend to hold off spending until they have to, but school gives them a reason to spend: Outfitting their children for the new school year.

CHECKS IN HAND

This season has some additional sparks.

For one, local schools are starting about the same time many taxpayers with children are receiving checks from Uncle Sam. The Internal Revenue Service is mailing tax refund checks, up to $400 per child, to 25 million middle-income families.

"The people getting these checks are the people who need to make purchases this time of year," said Chad Davis, director of government relations for the National Retail Federation.

"There are a lot of economic factors that seem to be coming in at the same time: back to school, tax credits, tax holidays," he said. "There's no doubt the timing couldn't be better for us."

States with tax holidays such as South Carolina's are offering shoppers another incentive to spend this time of year, the federation's Davis said.

Mark Thomas, S.C. regional manager for Charlotte-based Rack Room Shoes, said his company looks forward to it. "We look at this as a big kickoff for our fall and winter season," he said.

But Thomas and other retailers have said South Carolina's tax holiday hasn't been able to match the enthusiasm and sales of the first year, especially since Georgia and North Carolina started competing holidays.

"It seems to wane off a little bit as other states start to do it, Thomas said.

MORE COMPETITION

The out-of-state competition isn't as much a factor in the Midlands, but retailers here are already facing increased competition among.

Shopping options have been multiply the past couple years in the Columbia area, including last year's arrival of Kohl's department stores and the addition of stores such as T.J. Maxx and Ross Dress For Less in the growing areas of Lexington and Northeast Richland.

"When you look at Columbia and the market area, there are so many shoe stores, department stores and jewelry stores. The pie gets cut a little smaller," said Davis of J.C. Penney. "It keeps everyone on their toes."

To stay competitive, retailers must focus on improving customer service, quality and savings, he said.

Today's shoppers are discount-driven, he said. "Customers' loyalty today is to their pocketbooks and not the retailer," he said.