Retailers Upbeat About 4Q, Although Tariffs Make Some Uneasy

Many small retailers are upbeat about the fourth quarter as customers are more confident and spending freely, especially on non-essentials stores struggled to sell during the recession and its aftermath.

And while booming online sales have taken business away from many retailers, small stores with unique merchandise or services are having a sales surge that allows them to stock up. Still, there are pockets of uncertainty including retailers uneasy about the Trump administration's import tariffs.

Sales are so strong at women's clothing company Leota that owner Sarah Carson is asking manufacturers for more inventory for the holidays, a change from last year.

Leota, which sells dresses, tops, pants and skirts to stores and on its own website, has been getting reorders from retailers in mid-season, unlike recent years when customer demand was weaker. But taking on more inventory isn't something Carson's doing lightly; she doesn't want a big surplus that she'll need to mark down Dec. 26.

"The fourth quarter is a really challenging time in retail. You have to take the biggest inventory risk, and you have a very short period of time to move it," says Carson, whose business is up 55 percent this year.

Many small and independent retailers are more upbeat about the fourth quarter and holiday season than in recent years because customers are more confident and spending freely. Shoppers are especially interested in some of the merchandise stores struggled to sell during the recession and its aftermath, including clothes and home furnishings.

Retail sales tallied by the Commerce Department for the first eight months of 2018 were up 5.7 percent from a year earlier. Clothing store sales rose 5.7 percent, while furniture store sales gained 5 percent. Online and mail-order sales soared 10.1 percent.

And while booming online sales have siphoned business away from many traditional retailers, small and independent stores with unique merchandise or services are enjoying a sales surge that allows them to stock up, although they do so judiciously. Still, there are pockets of uncertainty including retailers in places recovering from natural disasters and those worried about the impact of the Trump administration's import tariffs.

Erica Tanov is ordering more merchandise for her website and three clothing stores in Los Angeles and the San Francisco Bay area. She expects the fourth quarter and holiday season to surpass last year, when demand was so strong she ran out of some styles. Sales have been particularly strong the past few months. Tanov says that despite the growth in online shopping, customers want to visit small stores where they can feel an emotional connection.

"People have been really responding to products that they know are made with integrity, and are supporting artisans both locally and globally," she says.

Retailing consultant Bob Phibbs expects small brick-and-mortar retailers to have a good holiday season.

"Retailers are getting back to being brilliant on the basics of customer service," Phibbs says. For example, owners are training staffers so they're more knowledgeable and attentive to shoppers, giving customers a reason to come to the store rather than shop online.

Portland Gear, which sells shirts, hats and other casual apparel with Portland, Ore., logos, projects a 15 percent sales increase during the fourth quarter, but is prepared to produce more inventory if holiday sales exceed expectations, co-owner Marcus Harvey says. The company makes its own garments and can quickly replenish its stock, Harvey says.

The company has one store in Portland and a website and plans pop-up shops during the holidays. Because of its local appeal, 70 percent of its sales come from its physical locations, with the remainder online. Harvey and his partners don't plan to change that mix.

But the prospect of tariffs makes some retailers uneasy about the fourth quarter. Ninety-five percent of the merchandise at the Luggage Shop of Lubbock, in northern Texas, is imported, much of it from China, and luggage is on the list of products the Trump administration has imposed tariffs on.

Owner Tiffany Zarfas Williams says suppliers are already passing their higher costs to her; by agreement, she must in turn raise her prices. That makes her worry about customer reactions.

"It puts so much uncertainty into our business when we're going into the most important time of the year," she says.

Williams is considering stocking more mid-priced and lower-priced items that customers may feel more comfortable buying.

The fourth-quarter outlook is also uncertain at Three Brothers Bakery, which has three stores in Houston. A year after Hurricane Harvey flooded the city, sales are down 25 percent from before the storm. Owner Janice Jucker is working on her website and increasing her marketing to find new customers and revenue outside of Houston in time for the holidays.

Many of Jucker's Houston customers are focused on rebuilding and repairing their homes; they aren't entertaining and ordering cakes and pies.

"The people in our neighborhood do not have dining rooms anymore. They are buying sofas and socks," Jucker says.

Ninety-five miles from Houston, Cynthia Sutton-Stolle has heavily promoted her gift shops on Instagram and Facebook and sought publicity for herself and other retailers in Round Top, Texas, a destination for antique buyers.

Sales have been below par since Harvey. The average transaction this year at Sutton-Stolle's stores, Silver Barn and Nutmeg's Kids, has totaled $15, down from $30 in 2017. But she's seeing more optimism among shoppers and retailers at Round Top's annual antiques show this week.

"We are seeing a lighter feel," she says. "Fourth quarter could be better than the last two years."

Joyce M. Rosenberg writes for The Associated Press.