German Retailers Eye Golden Holidays

The Associated Press
Sunday, December 17, 2006; 2:46 PM

FRANKFURT, Germany -- Shopkeepers in Europe's biggest economy have a grin on their faces _ and not only because Santa is coming to town.

Hard-pressed retailers are betting heavily on a fat Christmas shopping season this year after a string of duds, with Germany's economy finally showing solid growth expected to hit 2.5 percent this year.

The shopping areas have been packed at night and on weekends, particularly in major cities like Berlin and in Frankfurt, where the Zeil shopping avenue extends roughly a mile with an array of shops from luxury retailers Hermes and Vertu to decidedly more frugal fare such as Woolworth's and the 1-euro store.

"I've already been out doing my shopping," said Inger Bohnstedt. "Normally I don't buy before Christmas, but I bought a washing machine to beat the tax increase."

Germany's value-added tax is rising to 19 percent from 16 percent on Jan. 1 and retailers are hoping that customers will spend big to avoid the hike.

"Saturday fulfilled all the high expectations of our members," the German retail trade federation, HDE, said in a statement issued Sunday. "Finally, Christmas has arrived."

Since the start of Advent, shoppers had been out in force, but were reluctant to fork over fistfulls of cash for high-priced items like flat-screen televisions, MP3 players and kitchen appliances like mixers, dishwashers and ovens.

Many retailers had reported increased sales in electronics, too, including LCD TVs, portable GPS-based navigation systems and DVD recorders, along with digital cameras.

In the three weeks since the traditional holiday shopping season began after the first day of Advent, no major retailer has released figures or projections.

Forecasts for German retailers show a slight uptick from last year. A year ago, sales fell a seasonally adjusted 0.8 percent in December, the federal statistics agency Destatis said. This year, that figure is expect to grow 1 percent.

The sentiment is similar in other countries. In Italy, the small business association Confesercenti is forecasting modest increases with the only segments expected to experience a downturn being jewelry and cosmetics.

And with consumer confidence rising again, analysts say people may be willing to spend.

"The consumer gets spoiled. They want to be lured," said Faith Hope Consolo of Prudential Douglas Elliman, a New York-based company that tracks retailing in Europe and the U.S. "I'm predicting the strongest Christmas probably in five years."

Nicolas Bouzou, an economist with Paris-based consulting firm Asteres, said he saw "no major worries" for French storekeepers, predicting stronger seasonal shopping than the mixed performance of 2005. Last year, amid weak household morale, growth in luggage sales far outpaced most other categories of goods as consumers dreamt of escape.

Consumer sentiment has since picked up and should last through the holiday season and beyond, Bouzou said. "There's a kind of buying spree that isn't likely to end anytime soon."

Asteres expects overall nonfood retail sales to post 4 percent year-on-year growth in December, compared with 3 percent last year, led by a strong increase in consumer electronics spending.

Stores in Berlin can draw in customers past the old 8 p.m. legal closing time since the city government took advantage of changes in federal legislation and let stores stay open 24 hours Monday through Saturday and limited hours on Sunday.

"We think it will be quite a normal Christmas business. There may be some effects from the longer hours and the VAT, but I wouldn't overestimate them," said Albrecht von Truchsess, a spokesman for Duesseldorf-based retailer Metro AG, which operates department store Galeria Kaufhof, electronics retailers Saturn and MediaMarkt along with hundreds of hypermarkets.

At KarstadtQuelle AG, the Essen-based department store that has 90 some locations across Germany, including the famed KaDeWe shopping center, company officials said they were optimistic over the declining unemployment rate _ it dipped below 10 percent last month for the first time in four years. Fear of losing work has been a key burden on consumer spending for the past several years.

"We've definitely noticed an increased willingness to spend money," said Martin Schleinhege, a spokesman for the retailer said, particularly in its larger stores in major cities, where it is staying open until 10 p.m. (2100 GMT) on the weekends, save for Sunday.

"Many buyers are looking to spend to beat the VAT increase," he said.


AP Business Writers Colleen Barry in Milan, Italy and Laurence Frost in Paris contributed to this report.

© 2006 The Associated Press