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By Jorge Casuso
Second of three parts
June 9 -- It turned out to be Scrooge, not Santa, who
ushered out the 2007 holiday shopping season, ending a flat sales
year that saw the Downtown economy skidding for the first time in
five years.
Not since the aftermath of 9/11, have sales Downtown, as well as
across the city, been flat from the previous year, according to
City sales revenue figures analyzed by The Beat. In fact, sales
actually dropped Downtown during the final quarter of 2007, compared
to the same period the previous year, halting an upward trend.
A diving housing market, soaring gas prices and a credit crunch
that left shoppers clutching their wallets contributed to the sputtering
of Downtown’s revved up economic engine.
“There’s no doubt the economy is clearly slowing and
has slowed quite a bit,” said Robert York, the retail consultant
for the Bayside District. “People and businesses are more
cautious.”
That caution is showing in both numbers – Downtown saw only
a slight increase in sales in 2007, from $526 million in 2006 to
nearly $528 million – and actions – corporations have
pulled the plug on lavish bar tabs for employee bashes, according
to at least one restaurant manager.
The Downtown numbers were pulled down when Scrooge showed up during
the holiday season, which saw total sales Downtown dip from $142
million in the fourth quarter of 2006 to $140.2 million during the
same period in 2007.
By comparison, the city as a whole saw a 1 percent decrease in sales
last year, from a total of $2.968 billion in 2006 to $2.942 billion
last year. The holiday season saw an even bigger drop, from $822.76
million during the fourth quarter of 2006 to $807.25 million during
the same period last year, or a 2 percent drop.
And the sales outlook for the city isn’t expected to improve
any time soon, City officials warn.
“On the local level, Santa Monica can expect slower growth
in the coming two fiscal years than in recent years,” City
Manager Lamont Ewell wrote in his budget address to the City Council
last month.
“Our diversified tax base offers some insulation from the
turbulent economy, as City revenue sources are spread among major
tax sources and not as heavily concentrated in sales and property
taxes,” Ewell said.
However, the City Manager noted that in California, which has been
particularly hard-hit by the sub-prime mortgage crisis, “growth
in personal income and taxable sales in the coming year are projected
to be at the lowest levels in five years.”
The drop in consumer confidence was reflected on the Promenade,
where sales were flat across the board between 2006 and 2007, rising
by only 1.6 percent, from $308.1 million in 2006 to $313.1 million
last year. During the holiday season, sales dipped from $82.2 million
in the fourth quarter of 2006 to $81.6 million during the same period
last year.
Family apparel sales, the Promenade’s biggest single sales
category, dropped slightly between 2006 and 2007, from $115.94 million
to $113.15 million, but saw a 34 percent dive during the holiday
season, from $36.959 million to $24.245. (Fourth quarter figures
could rise when late tax payments are factored in.)
Specialty stores posted a slight increase in 2007, from $22.22 million
in 2006 to $22.55 million, but they saw a large dip – 25.7
percent – during the holiday season, from $6.9 million in
2006 to $5.1 million.
Restaurants followed the flat yearly trend dragged down by a slumping
fourth quarter, with sales rising slightly for the year, from $45.58
million in 2006 to $47.27 million in 2007, but seeing a nearly 10
percent drop during the final quarter, compared to 2006.
The more cost-conscious customer has helped businesses that offer
affordable prices weather the economic storm, said Shannon Ivey,
director of events and marketing for Yankee Doodles.
“We’re seeing a lot of families come because you can
still feed a family at our place for under $100,” Ivey said.
“We’ve seen more people come in that don’t need
to spend $30 a meal.”
But a more discerning eye on the bottom line has hurt when it comes
to special events, with corporations opting to scale down company
parties by purchasing bar tickets instead of spending as much as
$10,000 for an open bar, Ivey said.
The only Promenade stores that saw significant increases during
the holiday season were those specializing in women’s apparel
– up 29 percent, from $6.243 million to $8.027 million –
and “other” stores – up 35 percent, from 17.626
million to $23.758 million.
The steep hike in sales of women’s apparel was in large part
due to Forever 21’s move from Santa Monica Place, which was
winding down in anticipation of a major remodel, to the old Gotham
Hall location on the Promenade, York said.
“Gotham Hall had been empty for a while,” he said. “Forever
21 tripled in size” with the move to the new space.
The Bayside District outside the Promenade fared slightly better,
seeing a nearly 4 percent overall rise in sales in 2007 to $132.85
million, up from $127.98 in 2006. The upward trend continued during
the holidays, which saw sales increase to $35.3 million during the
2007 holiday season, up from $35.1 million during the fourth quarter
of 2006.
The biggest hikes were posted by specialty stores, which saw sales
jump 15.2 percent in 2007, followed by family apparel, which rose
13.6 percent. Specialty stores saw a dramatic 46.3 percent jump
during the 2007 holiday season, while family apparel stores saw
a 14.3 percent drop.
“It’s not as bad as it sounds in the media,” said
Eddie Guerboian, the owner of Readers Fine Jewelers on Wilshire
near Fourth Street. “Jewelry is passion, emotion. You have
to buy jewelry to make you feel good. You need it for special occasions.”
In addition to specialty stores, home furnishing stores –
which began moving to the streets around the Promenade some five
years ago – saw a healthy 25.8 percent increase during the
final quarter of last year, posting a 5.1 percent increase over
the year.
Despite the flat year, York feels the Downtown economy is poised
for a strong comeback. He notes that H&M, a Swedish apparel
store, will soon be opening an 18,000-square-foot outlet on the
Promenade and that several stores and restaurants are moving from
the indoor mall to the street.
What’s more, the corner of 2nd and Broadway, which has been
vacant for more than a year, will soon be occupied. Even the prospect
of Borders being bought out by Barnes & Noble has a silver lining,
opening up a large retail space on the Promenade that could lure
a major tenant.
“It’s a very large space that could add something dramatic
to the street,” York said. “In the long run, we still
have a positive trend of stores expanding.”
York notes that Pottery Barn could move from the Promenade to a
bigger space on 4th Street, while the cosmetic store, Sephora, will
take over a long-vacant space further north on the Promenade.
And the saga surrounding the closing of Santa Monica Place, which
posted an 8.9 percent drop during the year and a 5.6 percent drop
during the holidays, will have a happy ending when the mall opens
in the fall of 2009, York said.
“That’s another short-term hit for a long-term gain,”
York said. “We have some short-term pain and a soft economy,
but there’s good reason to be optimistic over the long run.”
PART
III -- Belt-tightening
Time for Restaurants
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