The city is on a serious skid when it comes to sales-tax revenue, a sign that the national recession has not left Baton Rouge impervious to economic hardship.
On the other hand, a clear contrast in consumer spending can be drawn between the city and the unincorporated parish, according to figures from Baton Rouge’s Finance Department.
While monthly revenue in the city has fallen consistently in month-to-month comparisons of 2008 and 2009 through November, it has increased most months in the parish, where retail complexes Mall of Louisiana, Marketplace Siegen Lane, Perkins Rowe, Siegen Village and Towne Center at Cedar Lodge are located.
It is no surprise that people are spending less, paying down credit-card debt and saving up in the event of job loss or stock-market crash. But government agencies depend on skimming from the fiscal health of spenders, along with income and property taxes.
And of course, private businesses that sell goods are hurting, which threatens more jobs. Since the Great Recession began, 8.4 million have vanished nationally, according to a recently revised Labor Department figure.
“We were in a better position than most of the country through most of last year,” says Tom Olinde, president of four Olinde’s Furniture stores, two of them in the city limits, who also oversees four Ashley Furniture stores. “Particularly the beginning of last year was pretty good.”
In mid-September, he says, the company began feeling the pain of cinched purse strings, which has carried through to this month. “We’ve just seen less traffic,” he says. “We’ve had a sharper decline in sales in that time period. It’s just been tough sledding.
“The petrochemical industry—it’s kind of in the tank, the price of gas is low. People are hearing all of this bad news on the news programs, so they’re tending to save more and spend less.”
On Feb. 10, Olinde’s began going-out-of-business sales at its North Street clearance center and its New Roads store. Beau Olinde, Tom’s brother and the company’s vice president, says those locations—the company’s oldest—have 90 days to clear about $400,000 of merchandise each.
“We deliver to New Roads out of our Baton Rouge store,” he says. “We think we can still serve our customers well out of our Baton Rouge store, which has a bigger selection.”
As a typically optimistic entrepreneur, Tom Olinde says he expects sales to pick up sometime this year and notes that a January ad campaign brought an uptick in business. Yet he says since the fall, “The consistent, strong four-week [period] has been tough to come by. The Christmas season was very soft compared to past years.”
September through November 2009 was a sluggish time for the city and parish, particularly in October, when the city reported a drop from about $8.7 million in 2008 to $6.7 million last year, and the parish reported a drop from about $6.3 million to $5 million.
The city gets about 47% of its sales tax revenue from retail trade, including food stores and car dealers. Total sales tax collection in 2008 was almost $171.4 million, which was up significantly from the previous few years—$150 million in 2005, $164.4 million in 2006 and $164.8 million in 2007.
On a recent weekday, there were plenty of people gathered at the food court of Mall of Louisiana, but stores were mostly devoid of shoppers. Signs at store entrances signaled “10% Tuesdays” or “Clearance sale up to 50% off” in an effort to generate business.
The mall property, which is the largest sales-tax contributor to the parish, did well overall last year, although such 2008 additions as lifestyle and power centers, were crucial.
“Our total sales were up, so our sales tax is up,” General Manager Todd Denton says, while comparable sales—those at stores open for a longer time than newer shops such as Borders and Ann Taylor—were not. “Those sales were slightly down for the year.”
He says he expects sales to be even this year compared with last year, with some shops notably growing, including Victoria’s Secret, which took over the former Brookstone store and part of the Disney Store and will add about 5,000 square feet to its 6,400-square-foot original site by May.
Nationally, the outlook appears unpredictable, according to January retail sales. The Associated Press recently reported that Walmart defied a trend in declining sales among retailers tracked by Thomson Reuters for January but that nearly half of other retailers being tracked missed Wall Street projections.
Although January is a weak month for consumption, retailers have posted declines since October, the AP says, citing the International Council of Shopping Centers-Goldman Sachs index. Further, the AP says Macy’s, which operates in Mall of Louisiana, plans to cut 7,000 jobs, after a year ending January 2010 that will be “well below analysts’ expectations.”
By contrast, the AP also recently said that retail sales posted a better-than-expected increase in January according to the Commerce Department, a 0.5% rise that might mean stronger economic growth in coming months.
“We’re noticing that there are going to be some spikes where you’ll see some sales growth,” says Monique Hester, marketing director for Cortana Mall, inside the city limits. “We expected that in January with gift-card sales.”
She says the mall, which prepared last year for declining consumer demand by emphasizing its bargain “brands and values” campaign, expects a rise in sales in March and April, as spring sales coincide with income-tax refunds. Beyond that, she says a spike is expected for back-to-school shopping and holiday sales. Otherwise, she foresees a long year for retailers at the mall until a notable recovery is measurable.
“We’re not expecting a consistent spike until later in the year,” Hester says, noting that over the past year, “Our sales have been impacted. Just like everyone else, some months were up, and some months were down. We’ve been watching the economy, and we planned for this.”
Olinde’s opened its newest store in fall 2008 on the Northshore. Shortly after, Olinde said he might not have made the move had the company foreseen the national downturn. Yet now, he says, the store has been a bright spot for the chain, along with the Lafayette location; Houma and Lake Charles have been softer markets.
“2010 is going to be a tough year,” Olinde says. “I think it’ll be a little better than 2009, but I do think it’s not going to be a fabulous year. I’d like to say different. We’re going to try to gain some market share, but we have to be realistic.
“We’ve been in business a long time. We don’t have a whole lot of debt. We’re gonna ride it out, but sometimes the things that go on a national level, you just have to live with.”
