SUPERMARKETS LIKELY TO OUTPERFORM OTHER RETAILERS

MARTIN SCHNEIDER

COLUMBUS, Ohio -- The current economic downturn will result in lowered sales growth for all retail sectors, according to analysts with Retail Forward here. However, the analysts also noted that supermarkets and mass merchandisers will be the least affected categories.

Ira Kalish, consultant with Retail Forward, a spinoff consulting firm of PricewaterhouseCoopers here, noted that the state of the economy, coupled with the tragic events of Sept. 11, will result in an average fourth-quarter sales growth of 1.5%.

Kalish made his comments during a Retail Forward conference call addressing the holiday outlook for retail operators, and what kind of recovery can be expected in the first-half 2002.

"Certain retail segments will be badly hit. But others will hardly be affected at all. Either way, it's the poorest retail outlook in over a decade and signals that we are definitely entering into a recession," Kalish said.

Frank Badillo, economist with Retail Forward, noted that supermarkets will see 1.5% growth in the fourth quarter of 2000, but will then start rebounding in 2002.

The hardest hit retailers, according to Badillo, will be apparel and consumer electronics stores.

"Apparel sales will drop by about 9%, while consumer electronics will drop about 20% as a result in the drop in consumer demand and the subsequent falloff in prices," Badillo said.

The channel that will be least affected by the economic downturn will be mass merchandisers and wholesale clubs, which will grow at the expense of supermarkets, Badillo said. He expects growth of about 2.5% to 5% through the first half of 2002.

"These are some small numbers, when you consider that these stores are usually posting double-digit growth numbers, but they are still above average when compared with other retail channels. Again, the price-cutting factor will be responsible for depressing growth here," Badillo said.