Losers might out number winners in this struggling economy, but Dan Parra is one of those coming out ahead.
Parra operates a Fort Worth repair shop called Ray’s Transmission. As the stock market slumps and more layoffs are announced daily, his business has soared about 40 percent in recent weeks because some motorists are finding it better to spend $2,400 to $2,600 to fix their car’s automatic transmission than to shell out for a new vehicle.
“I am doing about 13 cars a day now, up from nine,” said Parra, 49.
Not all auto-repair shops are seeing such an upturn, according to an informal spot check at four area mechanics, confounding popular belief that people will spend more to maintain their vehicles in bad times. One shop specializing in Japanese cars, Hond-Auto, said it’s doing more engine work but otherwise little change is evident.
Still, the economy is identifying some clear winners — and losers.
In the winning column are discounters like Wal-Mart and 99-cent stores, McDonald’s and supermarkets, bankruptcy lawyers and resale merchants, they said.
“I see the Wal-Marts and the Targets of the world more successful, more affordable. With economic outlook bleak for the next six months, people are going to be cautious,” said Robert Cuomo, dean of Merrimack College’s Girard School of Business in North Andover, Mass. “The losers are going to be the high-end rollers — like Macy’s, Saks, Abercrombie & Fitch.”
In Fort Worth, a big winner is Town Talk Foods, a discount supermarket dealing in overstock and discontinued groceries, whose year-to-date sales have climbed 17 percent, said Tom Potthoff, who manages the second-generation family-run business. By comparison, Kroger nationally is predicting a sales increase of 4.5 percent to 5.5 percent for fiscal 2008.
The jump in business has prompted Town Talk to add 10 employees, raising the staff to 45.
“What’s weird is that the net average sale is unchanged at $37,” Potthoff said, adding that this indicates that the supermarket on North Beach Street is drawing more budget shoppers.
“It’s the economy. And everything is selling — glassware, coffee, paper products, meat.”
Potthoff says he believes that the growth would have been even greater if gasoline prices hadn’t been so high for much of the year.
“We get people in from Dallas, Denton, Parker and Johnson counties,” Potthoff said. “When gas was cheaper, we had people driving in from Austin.”
While his customers are remarkably diverse, the added business has mainly come from middle- and upper-income families, he said.
“Our food-stamp sales are flat.”
Mrs Baird’s Thrift Stores in Texas also are finding a silver lining in the gray economic clouds. Sales of the out-of-code and surplus baked goods are up “more than 10 percent” this year, said David Margulies, a spokesman for the chain, part of Fort Worth-based Bimbo USA, which in turn is owned by a Mexican-owned baking giant.
Not all retailers are so fortunate.
The parent company of the upscale lingerie chain Victoria’s Secret reported a 66 percent drop in profit in its most recent quarter.
But aggressively priced e-merchants, who have had their dramatic ups and downs, might be counted among the blessed this season.
“Anything [based] on online,” suggested Bill Moncrief, the senior associate dean at Texas Christian University’s Neeley School of Business and the Charles F. and Alann P. Bedford Professor of International Business. Prices online can be more competitive because of lower overhead while people can easily compare them without having to leave the house and spend money on gasoline, Moncrief said.
“Other winners will be anyone who can provide refurbished durables, anything from electronics to used appliances,” he said.
Wine is seen as a loser because of its posher image, beer as a winner. But by how much?
Bill Koch, the founding chief executive of Boston Brewing Co., makers of Sam Adams beer, told the Star-Telegram that he expects some “trading down” from wine and spirits to craft beer, balanced out by some beer drinkers cutting back.
Losers cited by the analysts are department stores, hotels, Starbucks, high-tech companies, and lawn-care businesses, not to mention automakers and dealers. Casual-dining restaurants are taking a big hit, evidenced by the Bennigan’s chain’s Chapter 7 bankruptcy, while supermarkets and meal-preparation businesses like Fort Worth-based Super Suppers might fill the gap, Moncrief predicted.
Some restaurants are offering lower-priced specials and changing menus to hang onto business, said Farrokh Hormozi, an economics professor at Pace University in New York.
On the job front, aside from mortgage brokers, auto assemblers and home builders, information-technology professionals are being hurt in the downturn as spending for their services has dropped, Hormozi said. He added that the more specialized the IT expert, the harder it will probably be for him or her to find employment.
“Companies are looking for IT generalists, not specialists,” he said.
Steady on the employment front are education-related jobs, Hormozi said.
“It’s a bright spot in a generally bleak jobs picture, driven by the demographics of a rising population of school-age children and students attending colleges, community colleges and trade schools,” he said.
The legal profession hasn’t been immune to the economic hard times. Corporate finance attorneys, and merger and acquisition specialists are in less demand.
“Clearly bankruptcy attorneys are busy; if they’re not, something is wrong,” said Jeff Prostok, a bankruptcy lawyer with Forshey Prostok of Fort Worth. “And Texas is just starting to catch up with rest of the country. There’s a lot of business out there.”
On the home front
While people might cut back on lawn services, business consultant Peter Cohan of Marlborough, Mass., doesn’t see a sudden burst of business for Lowe’s or Home Depot. People already have mowers sitting in the garage, and many families are likely to hold off on home-improvement projects until they see where the economy is headed, Cohan said.
Checking out the options
Moncrief sees people seeking cheaper substitutes in various categories, taking the bus or train instead of flying, getting a supermarket-prepared meal or a Stouffer’s frozen entree instead of dining out, and attending Fort Worth Cats or TCU Horned Frog baseball games next year instead of the Texas Rangers.
“And while Six Flags may lose those kids who go several times a year, it might gain families seeing it as a substitute for a trip to Florida,” the TCU professor added.
Parra said transmission-repair shops weren’t always beneficiaries of converging economic realities.
Several years ago, when auto sales slumped, some major automakers began offering zero-percent financing. So instead of fixing a whacked transmission, Parra said, consumers found it easier on their pockets to buy a new car.
The situation has changed radically.
Many of those new-car buyers have failing transmissions and expired warranties but, even with interest-free loans, they owe more on the vehicle than its market value. Although it costs $2,400 or more to fix the problem, it’s less painful than ponying up for a new car.
“One guy just came in and slammed his keys down on the counter and said every cuss word in the book,” said Parra, whose father opened the business on West Pafford Street in 1975. “He had just gone 100 miles over his warranty.”
Asked whether he was going to put some of his newfound profits into a new vehicle of his own, Parra replied: “I’m not going to get a new car. I’m just trying to get ahead, maybe save some money, pay down some bills.”
By BARRY SHLACHTER