Handful of businesses doing fine

But for most, it's less spending, more lists

Bumping against a cloud of economic malaise, soaring prices at the gas pump are watering down demand for a completely different grade of fuel — a cup of joe.

The cool-down in the coffee sector was confirmed by Starbucks Corp. last week, when it said the latest quarterly profits from its ubiquitous cafes skidded 28 percent, as fewer U.S. customers elected to swallow $4 lattes.

With prices for food and other necessities continuing to climb and outstrip the Average Joe's paycheck, Starbucks joins a gloomy parade of businesses slogging through the consumer cash crunch, from department stores to neighborhood dry cleaners to new-car dealers — in short, just about any enterprise that relies on what is called "discretionary income."

Britt Beemer, chairman of Charleston-based America's Research Group, said his firm's recent consumer polls indicate that shoppers increasingly are arming themselves with lists, an ominous sign for grocers and other retailers that count on impulse purchases.

"Consumers are putting reins on themselves internally not to spend more money. ... I think this is where America is," Beemer said. "If consumers are making out lists more and more, it means retailers are going to be in deeper trouble in trying to get consumers to spend more money in their stores."

Some businesses benefit or even thrive in times of pain, such as credit card issuers and other cash-advance enterprises. Also, oil producers are soaking up profits from record crude prices, while farmers are cashing in on demand for ethanol and other crop-based fuels.

Lists aside, even some retailers are weathering the downturn, including Costco, Sam's Club and other one-stop, low-cost shopping meccas. "What consumers are doing are consolidating their shopping trips," said Richard Clodfelter, a professor of retailing at the University of South Carolina. "Costco and Sam's certainly allow that to occur."

Consumers are getting nicked on all sides, it seems. Airlines are hitting passengers with fuel surcharges and luggage fees. Procter & Gamble Co., the maker of Pampers diapers and Gillette razors, last week said it is able to raise prices simply because of the nature of its products, helping it eke out an 8 percent profit.

"Virtually everything we sell is not discretionary. It's a staple," said A.G. Lafley, Procter & Gamble's chief executive, in a conference call. "You have to get up in the morning and brush your teeth. You've got to shower. You've got to shave. You've got to wash your clothes."

But the winners are outnumbered by the losers.

"The losers are all of us," said Mark Vitner, senior economist for Charlotte-based Wachovia Corp. "Every extra dollar we have to spend on gasoline is a dollar we don't have to spend on something else."

Vitner estimated that necessities such as food and fuel, coupled with housing and health care costs, are now chewing up 57 cents out of every dollar, on average. "That's why consumers are so unhappy," he said.

Vitner said some of the industries that will be hit hardest are restaurants and retailers that sell big-ticket items such as furniture, household appliances and electronics. He's holding out hope that the tax rebate checks will provide a spending bump, but "unfortunately I think we're in for a long slog here," Vitner said.

The impact on the state's biggest industry, tourism, remains an open question. Don Schunk, an economist at Coastal Carolina University, falls in the bullish camp.

Schunk said most families who usually take vacations probably will do so again this year, but many likely will adjust or scale back their plans. That means the likes of Charleston, Myrtle Beach and Hilton Head Island could benefit at the expense of popular destinations like Florida.

South Carolina, traditionally a drive-to destination, is generally cheaper than many top Florida resorts, Schunk noted. Also, the Palmetto State is closer to travelers from the Northeast and Midwest, he said.

Peter Hull of The Post and Courier contributed to this report. Reach John McDermott at 937-5572 or jmcdermott@postandcourier.com.