By Jorge Casuso
May 28, 2009 – A nationwide economic meltdown during the fourth quarter of 2008 dealt a hard blow to Santa Monica businesses, resulting in a sales drop of $122.8 million in 2008, $80 million of that in the last three months of the year.
Total sales across the upscale beachfront city dropped from about $2.942 billion in 2007 to about $2.82 billion last year, according to an analysis of City sales tax revenues by The Lookout.
In the fourth quarter -- which includes the usually busy holiday shopping season -- sales dropped by $80 million, from $721,986,400 in the fourth quarter of 2007 to $641,881,700, a decrease of 11 percent.
“The fourth quarter is when we really started to see the downturn accelerating,” said Dave Carr, principal budget analyst of investments for the City. “Hopefully by the second half of the fiscal year (January through Jun 2010) things will level off.”
City officials expect the sales figures to continue dropping, at least through the rest of 2008, in large part due to a dearth of auto sales and the closure of Santa Monica Place for a major renovation.
The proposed fiscal budget for the 2009-2010 fiscal year, which was presented to the council on Tuesday, assumes sales will drop by 8.9 percent during the upcoming fiscal year, which begins on July 1. ("Proposed $510 Million Budget Maintains Services, Avoids Layoffs," May 27, 2009)
“It will take a few months to see the full impact of the economy,” City Manager Lamont Ewell cautioned during a press briefing this week. “We believe there’s a good possibility this economic downturn is different, and there won’t be this quick bounce back.”
The steepest sales drops in 2008 were in business services (-25.2 percent), home furnishings (-20.2 percent), department stores (-19.9 percent), specialty stores (-14.1 percent) and new car dealers (-13.5).
The car dealers saw the biggest loss of sales dollars, from $460.2 million in 2007 to $398 million last year, or a more than $62 million drop in sales.
And auto sales are expected to continue to drop, especially with the closure this month of the Infiniti dealership, Carr said.
The business category that saw the largest sales increase in 2008 was service stations (+6.5), but that was due to record gas prices during most of last year. Once prices plummeted, sales fell in the fourth quarter by 27 percent from the same period in 2007.
In fact, nearly every sales category saw steep drops in the final quarter of 2008 – business services (-41.2 percent), electronics/appliance stores (-24.8 percent), restaurants that serve beer and wine (-23.9 percent), department stores (-23.6 percent), home furnishings (-23.1 percent) and specialty stores (-21.3 percent).
Of the city’s 15 commercial areas, ten saw a decrease in sales last year.
The biggest drops were at Santa Monica Place, where all the stores but Macy’s closed down for a major renovation, ($26.6 million) and along Santa Monica Boulevard, the commercial strip where the city’s car dealerships are located (-$19 million).
Most of the city’s other major commercial strips also saw sales drop in 2008.
The Ocean Avenue Hotel District and Pier saw sales fall by nearly $10.2 million last year as tourism took a hit. Hotels posted a decrease of $2.32 million in revenues, with sales in the fourth quarter dropping $1.85 million.
The downward trend is expected to continue. City officials expect hotel bed taxes to decline by 3.6 percent during the upcoming fiscal year, after a precipitous 28 percent drop last month.
“The market has changed dramatically in the last six months,” Ewell said. “We’re not seeing travel from abroad, and businesses are shy after AIG’s fiasco,” he added referring to the lavish travel expenses reported by executives of the bailed-out insurance giant.
Also experiencing a drop in sales in 2008 were both the Bayside District outside the Third Street Promenade and Montana Avenue, each of which saw sales drop by $7.9 million.
Other commercial strips that saw sales drop last year were Olympic Boulevard (-$23.2 million), Wilshire Boulevard (-$16.2 million), Colorado Avenue (-$5.3 million), Pico Boulevard ($746,000) and Broadway (-$45,500)
Commercial areas that saw sales increase were the Promenade (+$4.5 million), Lincoln Boulevard (+$3.465 million), the Airport (+$2.35 million), Ocean Park Boulevard (+$1.5 million) and Main Street ($1.22 million).
Santa Monica business leaders say there are things businesses can do to increase sales, including boosting their advertising, collaborating with other local businesses and buying in Santa Monica.
“You have to find a way to cut expenses, get out there and market yourself, be more aggressive and connect,” said Laurel Rosen, president and CEO of the Chamber of Commerce.
“Some people cut their advertising budget in hard times when they should be doing the opposite,” Rosen said.
