Shoppers are spending, but on 'comfort goods'

The $600 metal sculpture still hangs from the ceiling, decorative pieces of pottery need dusting each day, and expensive handcrafted jewelry remain behind glass at the Silver Smith, an upscale gallery northwest of downtown Houston.

"Nobody wants to buy luxury items this year," says store owner Tammy Smith, sporting pants with faux leopard-skin fringe. But while sales are down here, jeans and sweaters at another store she owns spend only minutes on hangers.

Fellow retailers are telling her the same thing this holiday season, which unofficially kicks off today: Conspicuous consumption is out. Practical items are in.

The economy and war news are reshaping shopping habits. Now, many Americans are looking for the equivalent of comfort food when they hit the malls. Merchants say frivolity is out; gifts have to have more meaning.

"People want to give something important," says Tracy Mullin, the president of the National Retail Federation in Washington.

Unfortunately, analysts don't expect these good intentions to make up for people's concerns about the economy.

In a recent survey, the accounting firm Deloitte & Touche found that twice as many Americans plan to cut back on their holiday spending as plan to increase it.

The firm now forecasts holiday sales will be about the same as last year or up only slightly - not the modest gains many had hoped for not long ago. "It's going to be a tough holiday season," says Irwin Cohen, a Deloitte & Touche partner.

Still, merchants' outlook has brightened a bit in recent weeks.

In September, retail sales sagged in the wake of the terrorist attacks, anthrax scares, and high-profile layoff announcements. The University of Michigan consumer-confidence index plunged.

But in October, consumers started buying cars, thanks to zero-interest financing. Now, Richard Curtin, director of the University of Michigan consumer surveys, expects the worst may be over as Americans start to feel better about the US gains in Afghanistan and the economy. On Wednesday, his survey showed confidence edged up in November.

Some of that optimism - and even patriotic spending - is reflected in the malls around Houston.

Coming out of a Target store on a recent morning, Fred Thomas says Sept. 11 and the downturn in the economy have certainly affected his spending habits: He is spending more than he usually does for the holidays.

"We are trying to help out the economy," he says, hefting a bag into the car. His list of gift purchases includes electronics, clothing, housewares. "It's easier to tell you where we haven't shopped than where we have."

Increasingly this holiday period, Americans are spending more time shopping in places that provide goods for the hearth and home. The 106-store Crate & Barrel chain says it is experiencing good sales so far. Part of this, says Bette Kahn, a spokeswoman, is that people are not traveling as much and instead are inviting friends and family over for meals. "They need bigger pans, more glasses, new dishes," she says.

In Houston, Jessie and Matt Larson emerge from a Crate & Barrel with a box full of kitchen gadgets for a family member. Their jobs are safe, they weren't personally affected by the terrorist attacks, and they want to share their generosity with the people they love. "So we're not going to cut back on our spending," says Mrs. Larson.

Retailers expect such shoppers to gravitate toward classics and items that give a feeling of home or past good times. For example, the upscale leather shop, Coach, is having success with a large bag they call a duffel sack. "When people walk into the stores and see it, they smile - it's kind of like comfort food," says Andrea Resnick, an investor-relations representative.

Consumers are also warming up to discounting and other promotions. For example, the New York newspapers are filled with ads for 35 to 50 percent off from companies such as footwear producer ColeHaan, retailer Barneys, and fashion house Escada. "Retailers are going into this season with their eyes wide open - this will be a very promotional season," says Mr. Cohen.

In fact, many retailers have intentionally kept their inventories low, so they are now warning consumers to shop early to get what they want. Some have already canceled orders for everything from sweaters to pajamas.

Linda Cameron of Bethlehem, Pa., can attest to that. She and her teenage daughter, Hadley, recently traveled to a large mall at King of Prussia, Pa. Hadley had already picked out some clothes she really liked from the J. Crew catalog. "But, when we got to the store, there was almost nothing from the catalog," says Mrs. Cameron, who says she now won't waste her time shopping at the malls.

She's not alone. Back in Texas, Ms. Smith of the leopard-fringed jeans also owns a store in a mall - and it's really taking a hit. "The malls are what's hurting right now," she says.