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November 24, 2004

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Palo Alto Online

Publication Date: Wednesday, November 24, 2004

Xmas gift for business: Profits Xmas gift for business: Profits (November 24, 2004)

Merchants optimistic, but recovery still not complete

by Mari Sapina-Kerkhove

Despite statistics that paint a tepid picture of the area's economic health, local businesses are gearing up for the holiday shopping season with a strong dose of optimism.

"For us it's been a very good 2004 and we're hoping to close with a strong holiday season," said Eric Hager, manager at the Palo Alto Sports World and Toy Shop.

Over an eight-month period, Hager has observed a steady increase in sales figures. He also pointed out that holiday sales in 2003 improved upon the previous year.

Jennifer Holloway, director of marketing at the Stanford Shopping Center, viewed the upcoming season with similar ebullience.

"Our retailer feedback is that they predict a very strong holiday season," she said. "We're 100 percent leased for the holidays."

The latest additions to the complex were electronic stores from such major players as Sony, Brookstone and Apple. Holloway said she expects personal electronic items to top this year's wish lists.

Yet, figures compiled by the city suggest the economy hasn't quite recovered from the dot-com bust, which may temper holiday profits. In 2004 to date, there has only been a 2 percent increase in tax revenue income in the second quarter of the city's fiscal year, according to Joe Saccio, deputy director of administrative services for Palo Alto.

Third-quarter numbers aren't available yet.

"We're really not seeing the kind of robust growth that we'd like to see," he said. "We see a little bit of stability, but not a major rebound."

Accordingly, Saccio is conservative when asked to predict holiday profits.

"Based on first and second quarter results we hope that it would be at least slightly higher than the previous year," he said.

One recent for Saccio's reticence is that sales tax revenue dropped from $5.1 million at the end of 2002 to $4.6 million in 2003, a decrease by almost 9 percent.

"I think it went down significantly due to the economy and people spending less," he said.

While few retailers are emerging through the economic downturn unscathed, Faith Bell of Bell's Books said her type of business has to deal with additional challenges, such as ever expanding bookstore chains and an increasing trend of ordering books online.

"It's a sad time for bookstores," she said, referring to the fact that many Bay Area book retailers closed their doors over the past few years.

Bell is still not quite sure what to expect of the upcoming holiday season. "You can hear people with theories all over the place," she said.

Despite the depressed economy, she heard from fellow shop owners that consumers still seem to favor high-end goods over discount items. So she's been stocking up the store with everything from reasonably priced children's books to fine arts and architecture books and leather-bound works from the 19th century.

Given the fact that shopping for gifts at the nearly 70-year-old, family-run business has become a tradition for many Palo Altans, Bell said she is confident sales figures will rise with the holidays approaching.

"This is our big time of the year," she said. "From here on it's going to be really busy."

As to whether Bell's will be busy enough to end 2004 on a strong note, she said it's best to wait and see. Having weathered many storms in her long-standing career, Bell knows how to look at the bright side of the business she's in.

"The nice thing about books is," she said, "you can keep them on the shelf forever."

E-mail Mari Sapina-Kerkhove at msapina-kerkhove@paweekly.com.


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