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The owners of Angie’s Kid Zone don’t know what to expect this holiday season. First, their online sales exploded in April, during what they thought would be a slow time of year, then fell by more than half in the following two months. Things started looking up early this fall, then the stock market crashed 777 points in one day.

“We’re kind of a little nervous this year wondering what’s going to happen,” said Brian Sweeney, co-owner of the Valley Junction store with his wife, Angie.

Victoria Veiock, owner of Wicker and the Works, also in Valley Junction, feels just as anxious. “I think everybody’s scared, no doubt about it,” she said. “I’m scared for everyone, for all of us.”

“I’m not quite sure what’s going to happen yet,” said Michelle Galvin, co-owner of The Velvet Coat in the East Village. “I think everybody is (a little on edge).”

The last two months of the year usually put a twinkle in retailers’ eyes, but this holiday season looks like it will be a mixed bag, with increasingly pessimistic economic news that could cause consumers to cut back on gift spending.

Retail forecasts released in September predicted that holiday sales will increase by 1 to 2 percent from the prior-year season. The National Retail Federation is expecting 2.2 percent sales growth in the November-December period, which is half the 10-year average of 4.4 percent growth.

But Iowa State University Extension economist Meghan O’Brien said reports coming out now, especially after the stock market crash two weeks ago, are less optimistic. She agrees that sales could be much worse than experts are forecasting.

Though Iowa is not immune to the national trend, it may fare a bit better. “Iowa tends to have less severe peaks and valleys,” O’Brien said, “but more gradual and earlier adjustment. So Iowans are already pulling back spending. For our retailers, they’ve probably adjusted to that, perhaps better than we’ll see in the national figures.”

Even if retailers hit the 2.2 percent growth mark, O’Brien said those figures don’t account for inflation. Retailers have faced major price increases this year as the costs of gasoline and other commodities have skyrocketed, which means even a 2 percent growth in sales may not cover the increases in their operating costs. “This is why I’m skeptical of all the forecasts,” she said.

One thing is certain, though. Retail spending has been slowing since 2007. According to a U.S. Census Bureau report, retail sales were down 0.3 percent in August from July and were just 1.3 percent ahead of August 2007.

Rising prices, lower disposable incomes, lower savings rates, a housing slowdown and rising unemployment rates, along with the uncertainty of an election year, are all pointing toward a slowdown in consumer spending this holiday season.

“My guess,” O’Brien said, “is this holiday season is not going to be near what retailers need to stem the tide of the economy.”

With consumer spending accounting for two-thirds of the national economy, a bad holiday season could have a ripple effect. Some retailers may be forced to shut down, which would affect manufacturers and suppliers and the unemployment rate.

“I think we’ll have a flurry of activity in the first half of 2009,” O’Brien said, “As retail adjusts, there’s going to be most likely more bankruptcies and in most places (closing stores). I think we’ll see tremendous fallout in the first half of ’09.”

It’s all a guess

The holiday season accounts for a big portion of many of Valley Junction’s specialty retailers’ total sales, said Jim Miller, executive director of the Historic Valley Junction Foundation. This year, retailers’ reports are mixed, with some merchants having great sales.

“We’ll see what happens in the next three months,” Miller said. “If it’s really good, that’s great. If it’s really bad, we’ll see a result in businesses in the first quarter saying, ‘I can’t do it anymore.'”

Jordan Creek Town Center, which has had steady growth since it opened in 2004, has had relatively flat to a slight decline in sales this year, even though traffic numbers are up slightly, said the mall’s senior general manager, Randy Tennison.

“Unfortunately,” he said, “this will be a very interesting holiday season in terms of trying to forecast what’s going to happen.

“I believe traffic will continue to be strong. The question is, will the consumers spend the money that they typically do?”

Jordan Creek will be 100 percent full, with some temporary tenants and kiosks by November. The mall also plans to bring back Rockin’ Shoppin’ Eve, which last year attracted around 35,000 people at midnight at the end of Thanksgiving Day. This year, Tennison said, Younkers and more specialty retailers are participating, which could significantly boost attendance.

Mall hours will actually be reduced from past years “to make sure the mall is open during the most productive and efficient times possible,” Tennison said.

Merle Hay Mall sales “have held up very well this year,” said Elizabeth Holland, CEO of the mall’s managing company, Abbell Credit Corp. Most of Merle Hay’s tenant space will fill up with temporary vendors, except for two large spaces that Ulta and Staples will build out this spring. The mall’s east main entrance is close to being finished, and the rest of the mall’s improvements will be completed this spring with some new tenant announcements expected then.

New this year will be Morning Mania, an event designed to attract people to the mall the day after Thanksgiving.

One bright spot this holiday season may be discount retailers, which could attract consumers looking for low prices and sales before the season ends. Wal-Mart Stores Inc. has already announced that it is cutting prices on 10 of its popular toys, including certain Barbie dolls and Hot Wheels, to $10.

Specialty retailers are expected to fare the worst.

“During the consumer (spending) expansion and big housing expansion, higher-end specialty retailers were able to come into existence and have a customer base,” O’Brien said. Now, consumers are looking for cheaper options versus buying locally.

Retailers adjust

As the economy lingers on the brink of recession, retailers are making adjustments in inventory, pricing and staff. O’Brien said consumers can expect to see stores open fewer hours and working with less staff, because those things can be adjusted more easily than fixed costs such as rent and utilities. Christmas could also arrive early this year as retailers try to maximize the shopping season.

Brian Sweeney of Angie’s Kid Zone said it’s hard to compare sales figures, because the store has only been open since April 2007, although the business has been selling items online for more than two years. But last year, 45 percent of its total in-store sales and two-thirds of its online sales were during the November-December period.

He has seen some worrisome signs though, with online sales, its largest portion of business, dropping by nearly two-thirds from April to June when gas prices started skyrocketing.

“We may fare better than others since people put kids first in buying Christmas presents and maybe will cut in other places,” Sweeney said. “That’s definitely the optimist in us.”

Sweeney said he and his wife plan to advertise more than last year, using an e-mail list to keep its regular customers up-to-date on promotions. The goal, he said, “is to make sure, especially with regular customers, that we get in front of them as often as we can without being obnoxious.” Angie’s Kid Zone also has had some holiday items in its store since Valley Junction’s Christmas in July promotion.

The owners have cut back on some quantities of items ordered, though they haven’t been able to cancel orders entirely after making commitments in February and March.

After 30 years in the business, Veiock hopes people will keep Wicker and the Works in mind. She’s not really changing her holiday routine, which involves a lot of promotions. She also has not been able to cut back on inventory, having to place orders after the last holiday season.

“I try to fit a niche,” she said. “The only thing to do is to try to make a spot in the marketplace for myself and not compete a whole bunch with other people.”

She said it helped to attend Valley Junction’s August merchants’ meeting, where people involved in small business development and banking spoke to the neighborhood’s retailers about how to survive a challenging climate and which government resources could help.

Galvin of The Velvet Coat, a women’s specialty apparel shop, said she’s paying more attention to what she’s buying.

“People seem to be a little choosier,” she said, “but I can’t blame them.”Holiday sales are not a huge part of her business compared with the spring and fall seasons, but she has shifted some of her inventory away from party dresses to nice tops or accessories that can be paired with items customers already have, expecting people to spend more time with family this year versus attending big events.

“I don’t think we’re expecting it to be a record-breaking year,” she said, “but I don’t think anyone thinks that. I’m hoping to stay in the game mostly with what we’re buying.”

Looking up

With most of her wines priced under $25 per bottle and offering other items such as corporate gift baskets, Andrea McGinness, co-owner of WineStyles in West Glen Town Center, expects to do well this holiday season.

“Honestly, I haven’t felt any effects yet,” she said. “I keep thinking people are going to slow down, but I just haven’t seen it yet.”

McGinness also hosts many events, including wine education classes, ladies’ nights and private parties, which help draw people into her store. With the few gifts and accessories she is purchasing, she has been a little more cautious, only picking items she’s more confident will sell.

After making some slight adjustments by not hiring new employees when a couple of workers left early this year, Carroll DeVries said that was probably a mistake. The general manager of Anglo Diamond said he hasn’t seen a slowdown yet and sales are on par with last year’s, with wedding rings continuing to be the store’s main business.

“Maybe foot traffic is down a bit,” he said, “But diamond sales are up,” which has led the owner to purchase more inventory for the holidays.

Holiday sales made up 35 percent or more of his total sales when he owned stores in Valley West and Southridge malls, DeVries said, but Anglo’s holiday sales are only about 20 percent of its business.

“I think the holiday season will be good,” DeVries said. “I don’t think it will be much different than last year.”