Sales at risk if retailers slash holiday hires

By Nicole Maestri

NEW YORK (Reuters) - U.S. retailers have shed tens of thousands of jobs this year and some are scaling back plans to hire extra help this holiday season, but cutting too deeply could put sales at risk during the crucial year-end rush.

Retailers often begin hiring seasonal workers in September, ramping up staff in time for the November and December sales crush. But the worst financial crisis since the Great Depression hit the United States in mid-September, roiling markets and stoking fears of a recession.

Before the crisis hit, Challenger, Gray & Christmas had forecast retail hiring for the upcoming holiday season would be the weakest since 2001, as consumers pull back and retail profits get squeezed by higher costs and weak sales.

"We're still going with that it's going to be lower than last year," said Challenger spokesman James Pedderson of the forecast. But given the recent turmoil, he added: "It may be much lower."

Retailers such as consumer electronics retailer Best Buy Co Inc (BBY.N: Quote, Profile, Research, Stock Buzz) and mid-tier department store chain J.C. Penney Co Inc (JCP.N: Quote, Profile, Research, Stock Buzz) have indicated the weak sales environment means holiday staffing could be scaled back.

But in shunning extra hires, retailers run the risk of alienating cash-strapped shoppers, analysts said. Consumers may need to spend more time hunting for bargains this year, but will have little patience for waiting in extra-long lines or facing check-out hassles.

"Convenience, ease of check out, availability of stock, all are going to play a huge role in where people are going to shop this year," said Marshal Cohen, chief industry analyst at market research firm NPD Group.

"If you've really limited the amount of staff on the floor, the retailer is going to put themselves at a little bit of a loss."

WANING DEMAND, WANING HELP

Retailers have shed roughly 251,000 jobs year to date, according to government data on October 3, as volatile energy costs, high food prices, a crumbling housing market and tighter access to credit curb the ability of shoppers to spend.

Retailers are now headed into the all-important holiday season, which can account for 25 to 40 percent of annual revenue.

While the outlook for the holiday was bleak, with some economists forecasting the weakest growth since 1991, the fresh financial turmoil has thrown even those forecasts into doubt.

Government data released on Wednesday showed that September sales at U.S. retailers posted their biggest monthly decline in more than three years. Retailers are now trying to determine how to staff their stores in an environment where consumer spending has become nearly impossible to predict.

Best Buy has said that, while holiday hiring should top 2007 levels, it will add fewer workers than originally planned because sales growth in the second half of the year is expected to slow from the first half.

Target Corp (TGT.N: Quote, Profile, Research, Stock Buzz) said it continues to experience a "soft" sales environment, so it is planning all areas of its business accordingly -- including hiring seasonal workers.

J.C. Penney says it will staff its stores according to customer traffic, which has weakened this year.

Retailers are caught between a rock and a hard place when it comes to holiday hiring, said Craig Rowley, retail practice leader at human resources consulting firm Hay Group.

"On one hand, sales are going to be hard to get this year, so if you follow your budget, you're going to have less staff," he said. "But you also need to move the merchandise."

While retailers may be tempted to slash staffing to match depressed sales, doing so could mean lost business if it results in messy stores, empty shelves or long lines.

EASIER TO HIRE?

One advantage of having the U.S. unemployment rate at a five-year high means retailers can delay hiring seasonal help, said Jonas Prising, president of North American operations at staffing services firm Manpower Inc (MAN.N: Quote, Profile, Research, Stock Buzz).

"They will have more talent available on the market, which means they can make hiring decisions much closer to the time than they would normally," he said.

Toys "R" Us said it plans to hire about the same number of employees as it did last year, roughly 35,000 nationwide. To avoid being short staffed if demand is greater than expected closer to Christmas, the toy retailer offers "flex" time.

"If we get closer to the season and the stores get busier, employees will have the opportunity to take on more hours," said spokeswoman Jennifer Albano.

Linda Shea, global managing director of customer strategies at market research firm Opinion Research Corp, said if stores are easy to navigate and marked with clear signs, it could ease the need to have extra staff available to guide shoppers.

But retailers should not scrimp on hiring where it will count, especially at the check-out line.

"If I'm spending more time shopping and searching, I won't have any more time to give you standing in line," she added.

(Additional reporting by Sarah Coffey and Aarthi Sivaraman; Editing by Andre Grenon)