News
Sliding consumer confidence could put a damper on holiday sales cheer

Oct. 16, 2008 – The writhing of financial markets could provoke Canadians to tighten
their purse strings and force retailers to slash prices this holiday
season.

Topping retailers' wish list will likely be a boost in consumer
confidence as the struggling economy weighs on the minds of shoppers.

The
fear of frugality might force merchants to scale back prices to drive
more traffic during the critical months ahead of Christmas, the key
selling period of the year.

"People are fairly pessimistic. They
haven't been this pessimistic in three years about the state of the
Canadian economy, particularly in Ontario," Richard Jenkins,
vice-president of research at market research firm Taylor Nelson
Sofres, said Thursday.

"This week's bad news has the potential to
really hurt spending because of the degree to which people are seeing
their assets just disappear."

Economic observers see a turning point for consumer sentiment.

Since
mid-July the Toronto stock market's main index has lost about 20 per
cent of its value, pulling personal investments down with it – and
ultimately this shrinkage of wealth will take a toll on people's
willingness to spend.

Canadians are already taking a bleaker view of the economy, according to a poll by Angus Reid Strategies.

An
online survey earlier this month found 36 per cent of respondents said
the economy is in "poor" shape, an increase from 30 per cent in July.

Still,
confidence did not appear to be tumbling yet – about 59 per cent in the
poll said the economy is in "good" or "very good" condition.

"When
it comes to Canadians and their own finances, they seem to believe that
things are going steady," said Mario Canseco, a researcher for Angus
Reid.

"As we move towards the fall and things start changing, we may see … they don't think it's a good time to spend."

Retailers
are already bracing for the impact. Few publicly traded store operators
in Canada have said they expect to see a surge in sales during the last
half of the year.

Canadian Tire Corp. (TSX:CTC.A), one of the
more optimistic national retailers, started the year with an
enthusiastic forecast before scaling back due to slower spring-quarter
sales.

"Even if the retailers expect this and go into the holiday
season with lighter inventories, I still think they're going to have to
be aggressive on promotions to drag people in the door," said Brian
Yarbrough, a retail analyst at Edward Jones in St. Louis.

Last
year, retailers had to contend with the rise of the Canadian dollar,
which forced them to take an axe to the prices of many items to be
competitive with the United States.

This year, even though the
dollar has lost some altitude, retailers are going to have to get
creative and aggressive to drive sales, Yarbrough said.

"There's
still going to be a demand for electronics, but otherwise outside of
that – apparel and general merchandise – it's going to be tough."

Yarbrough
expects holiday sales totals will be about one or two per cent above
last year's, which would be the weakest increase since 2002.

A divide between how men and women view the economy could influence how many pricey items are taken to cash registers this fall.

The
Angus Reid poll indicated 67 per cent of men consider economic
conditions "good" or "very good," compared with 51 per cent of women.

"Women
might actually be more in touch with specific issues and prices because
in many cases they are … the ones who do more shopping and are in
touch with the economy," Canseco suggested.

"If women believe that the economic conditions are not right that might manifest the spending habits of Canadians."