Cash Registers Ring Downtown

By Gene Williams and Jorge Casuso

The last time the Downtown economy was this strong, the World Trade Center was still standing and America was at peace.

Between October 1 and the end of the year, businesses on the Third Street Promenade – led by clothing stores – generated nearly $76 million in sales, or a 13.2 percent increase over the same quarter in 2003, according to the latest sales tax figures.

In the rest of the Bayside, businesses generated more than $28.5 million in fourth quarter sales, an 8.3 percent hike over the same period the previous year, with restaurants leading the way.

"We're at a very high performance level, and we're continuing to grow at a very healthy pace," said Robert O. York, a consultant for the Bayside District. "We are performing exceptionally well, and we're getting new stores, so that certainly helps."

Cash registers resounded all across Santa Monica, as holiday purchases helped overall sales jump 10.6 percent in the final quarter last year, compared to the same period in 2003, putting the city on par with the state and county, which saw sales increase about 11 percent.

"Overall, the local economy appears to be relatively strong, based on sales tax revenues and tourism increases over the last twelve to eighteen months and the gradually improving economy at state and national levels," said Finance Director Steve Stark.

"The fourth quarter looked stronger than we expected," Stark said. "Sales tax in the fourth quarter was very strong after somewhat lower growth in the previous two quarters."

Every type of business on the Promenade – from clothing stores and restaurants to specialty stores and home furnishing outlets – saw sales increase, while in the rest of the Downtown every category but restaurants and specialty stores saw a hike in sales.

On the Promenade, the new Apple store drove the sale of office equipment up by more than $3 million, from nearly $5.4 million in the fourth quarter of 2003 to nearly $8.6 million during the same period last year, according the latest sales figures.

"It's a good trend, obviously, that this is all up," said Bayside board member John Warfel. "It's a good showing for the Bayside District.

"The traffic is good, and it seems to be consistent, and we've had new stores," he said. "Some of the stores that opened are coming into their own."

The panic that grounded overseas travelers in the wake of 9/11 has subsided, replaced by a weak dollar that has driven tourists to the United States on spending sprees, Bayside officials and retail experts said.

"From every statistic you see regionally, tourism is certainly back," said York, a partner in the Fransen Company. "Certainly, the Asian visitor is back in droves, which has been missing since 9/11. The European traveler is back.

"You add in the currency issue, which makes everything a bargain here, and that's a situation that hasn't happened in many, many years," York said.

Foreign travelers are boosting sales at Ye Olde King's Head Shoppe on Santa Monica Boulevard, where, overall, business has been "very, very good," thanks to an increase in customers using travelers' cheques, said owner Ruth Elwell, a member of the Bayside District Board.

At O’ My Sole shoe store on the Promenade holiday sales were also strong, thanks again in large part to tourists cashing in on a weak dollar.

"We always do well every Christmas," said manager Mojgam Motami. "Right now it's the tourists" who are the customers. "The Euro is high and the dollar is low, so people come here to shop.

"This is a tourist area here anyway," she added. "You always get a lot of tourists."

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The shopping boom on the Promenade was driven by clothing stores, which saw sales jump by more than $3 million during the fourth quarter of last year to $33.4 million.

"You've got Old Navy, they're doing great numbers," said York. "You've got Gap. Some of the stores have continued to do well on the Promenade."

On a typical Saturday afternoon, groups of young people – most likely high school or college students – were weaving in and out of the chain clothing stores like Gap, Urban Outfitters and Express.

At J. Crew on the Promenade, business has been pretty good in the past couple of months, after sales increased during the holidays, said Cornell Stanton, the store's associate manager. And Stanton expects sales to continue to rise as summer approaches.

If clothing sales boomed, restaurant sales Downtown saw a more modest increase, from $16.63 million in the fourth quarter of 2003 to $17.29 million in the same period last year.

Eddie Rossoni, general manager of Johnnie's New York Pizza on the Promenade, has seen business increase, but he doesn't think the thriving strip has bounced back to its heyday in 2000.

"It was amazing. I don't see days like that anymore," said Rossoni, who has been in Santa Monica since the early 1990s.

Rossoni is optimistic about the future after the restaurant recently moved a few doors into a larger space that seats 180 diners, instead of 70. "Its all about the summertime and weekends," he said.

While sales at Promenade restaurants rose $1 million from some $7 million to $8 million, restaurant sales in the rest of the Bayside dropped from nearly $9.5 million to less than $9.2 million.

The biggest sales drop took place in restaurants that sell liquor outside the Promenade, where businesses saw a decrease from nearly $5.8 million in the fourth quarter of 2003 to a little more than $5.1 million last year.

But at some restaurants off the Promenade business was on the rise. Sales "definitely took a dip," after 9/11, said a bartender at PF Changs, but that's all over now, he added.

Business was booming during a Saturday afternoon in early May. Nearly all the tables were full and the bar was busy as a large staff hurried to help the customers.

"It's good," the bartender said, as he pulled a draught of beer for a customer.

"It's always busy. This is a corporate restaurant. They're all over the country, so we get a lot of exposure."

At Wahoo’s Fish Taco, business is returning after the post 9/11 slump, said Martita, a manager at the Mexican restaurant with a surfer motif. The small restaurant was half full on a recent Saturday, even though the lunch rush had ended more than an hour earlier.

"When we started three years ago, there was more business," Martita said. "Last summer was really busy. Summer is always busy. Now it's a little slow. But on the whole," she added, "it's great."

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Business at specialty stores Downtown saw only a steady increase in the fourth quarter, from $9.44 million to $9.76 million. While specialty stores outside the Promenade saw a slight slump in sales, shops on the thriving strip saw sales rise $400,000 to nearly $4.6 million.

One store that saw sales jump was Restoration Hardware. "It was crazy," a manager, who declined to give his name, recalled. "On Christmas Eve people were lined up outside the door" waiting to shop.

And it seems that the holiday spirit has followed the home decor and furnishings store into the New Year. Business was strong during the first quarter and now things are heating up for summer, the manager said.

"It's (summer) definitely here, and we're feeling the rush," he said. "People are buying stuff for their outdoor parties and for the beach," he explained. "We have all our outdoor furniture out on display and people are definitely responding to it."

Restoration Hardware's customers are a "big mix of locals and tourists," the manager said. "The residents buy the big stuff and the tourists buy the little stuff that they've never seen before."

But Christmas wasn't anything special for Becky Glenn, who manages Borders Books and Music on the Promenade. "You know," she said thoughtfully, "it was pretty flat."

While the Yuletide always brings a "significant increase" in the store's sales, last year "wasn't busier than previous Christmases," she said, adding that things have stayed "fairly quiet" so far this year.

"We're all waiting for July when the next 'Harry Potter' comes out," said the self-described "bookworm." "All the bookstores are pinning their hopes on it."

Until then, "we have a couple of big things in the works," she said. By the end of the month "the cafe will be completely remodeled" into a Seattle's Best.

"We get lots of tourists, lots of locals and more than our fair share of the transients," Glenn said. "Nice, diverse customers."

If sales at specialty stores on the Promenade rose in the fourth quarter of 2004, shops off the Promenade saw sales drop by nearly $1 million to $5.2 million.

On 4th Street, Bay Lighting, which has been selling lamps and light fixtures Downtown for more than 50 years, is taking a hit from chain stores and a still-struggling economy, said owner Robert Gellert.

"It's been slow for quite a while, over a year," Gellert said. "The general scheme of things is the economy has been flat," said Gellert, adding that business began to fall off shortly after August 2001.

"We got the opportunity to move over here (from nearby), and we held our own for about a year until the market crashed," he said. Now he doesn't "have a big staff because business is slow."

Gellert blames the slump in large part to competition from big-box discount stores that can afford the high Downtown rents.

"The prices we have to pay for rent really hurts" small independent businesses with limited sales, Gellert said.

Big chains "have multiple stores" he said, explaining that if one does poorly it's balanced out by another that is doing well. "They write it off as a loss," he said.

Still, Gellert hopes things will pick up. "We hope to expand our showroom," he said, to display "the new look of designer lamps."

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But not all independent specialty shops off the Promenade saw sales drop. The last time Hennessey and Ingalls did so well, the renowned art and architecture bookstore was on the Promenade. Now they're around the corner on Wilshire, and business seems as good as ever.

"Moving off the Promenade turned out to be a good thing," said Robert Barrett, a store manager for nearly 11 years. "This is our second Christmas at this location, and it seems people are finding us."

Inventory, Barrett said, was one indicator of a successful holiday season. "We usually have one item that sells really well, but this year we seemed to have across-the-board sales," he said.

The move off the high-end walk street, to just around the corner at 214 Wilshire, hasn't had a negative impact on business, Barrett said.

"We thought there would be less foot traffic but surprisingly, that's not the case," he said. "We are also a destination store, and we get a lot of people coming in from all over Los Angeles."

East on Wilshire, Reader's Fine Jeweler's on the corner of 4th Street also saw business pick up steadily after 9/11, despite news that the economy is slowing.

"As negative as the news makes it seem, we're not feeling it," said Evelyn Guerboian, the store's financial administrator. The sales increase, Guerboian said, is likely due to shopper confidence.

While "booming" is not exactly the word store manager Gary Kinsinger would use to describe sales at Sur La Table on Wilshire near the Promenade, there has definitely been a rise in business since the days right after 9/11.

Down the block on 5th Street, the holiday season was good to Ellen West, who started the Acorn Store – a miniature fairy land of imported toys – five years ago in a tiny storefront between Santa Monica Boulevard and Arizona Avenue.

"Christmas was very good," said the Slovakian-born West. "The holidays carry me through the whole year."

The store gets foot traffic from the nearby post office and Wild Oats grocery across the street, she said.

"This is a very good business," West said. "We're the only retail store on this block. People buy natural foods then they come across the street to buy natural toys."

If the Downtown is to continue to thrive, a number of issues – including a dearth of parking, outdated movie theaters and development – must be dealt with before they become serious problems, Bayside observers predict.

"We've charted a course many years ago, and it's playing out pretty well," said York. "We just have to stay on top of it... There are a lot of things that need to be managed to continue on an even keel and prosper."

Olin Ericksen and Menaka Fernando contributed to this report