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Special Report: Coping with the crunch

By J. FERGUSON
Sun Staff Reporter
Sunday, November 02, 2008

When customers at Fratelli Pizza choose a plain cheese pizza instead of "The Works," it is a sign the economy is in trouble.

Across town in Sunnyside, the repair bays at Lifetime Automotive are full of cars and trucks, although many owners are skipping the tune-ups and annual preventive maintenance to save a few bucks. Most of the work is what's needed to get an inoperable vehicle back on the road. But one downtown business owner said he is bucking the trend, reporting strong sales at the Old Town Shops despite what most see as a lackluster local economy.

The Arizona Daily Sun talked with six local businesses to get a sense on how Flagstaff residents are spending their paychecks in this recession. From a Honda dealer with an unexpected inventory of unsold hybrid vehicles to a jeweler selling wedding rings with smaller diamonds, most businesses report a decline in sales.

PIZZA STILL SELLS, WITH FEWER TOPPINGS

Two men saunter into Fratelli Pizza's downtown location a few minutes before noon Tuesday. The business had just opened and men represent what will be a steady line of customers for Flagstaff's favorite pizza parlor.

Each orders a one-topping slice of pizza for lunch, avoiding the special: the slice loaded with chicken, bacon, onions, tomatoes, jalapeno peppers and BBQ sauce.

Fratelli Pizza co-owner Brent Schepper said he has noticed that trend: choosing a less-expensive pizza over the usually popular specialty pies.

"The (discounted) specials are getting ordered more often and people are not ordering as many specialty pizzas," Schepper said. "You are seeing a lot of people go pepperoni or just plain cheese."

An increase in the cost of flour, cheese and other raw ingredients forced Schepper to raise his prices earlier this year.

"We did raise out prices because of increases in our raw ingredients, so if our sales are flat we are probably down a few percentage points."

But Schepper said most customers are generous with their tips despite a weak local economy.

"People are still throwing a dollar in the tip jar when they order a special and people are giving good tips for deliveries ... I think people are thinking, 'Here is an extra dollar for the more expensive gas.'"

EVEN HYBRIDS HARD TO MOVE

A handful of 2009 Honda Civic Hybrids are parked on a corner of Flagstaff Honda's lot.

That is a change from last June, when the popular gas-electric hybrids were all spoken for.

"You couldn't get them back then," said Gary Seeley, the owner of Flagstaff Honda. "Now, I've put them in my commercial to let people know we have them."

Seeley said his business was exceptionally slow last month. At one point in September, the entire dealership had only sold two vehicles over the span of 10 days.

Business has since picked up, but it is still slower than normal.

Seeley believes that a lot of his business is being dictated by news headlines and the condition of 401(k) retirement accounts.

"Most of our customers have the same job and mostly the same expenses," Seeley said. "This is about consumer confidence."

Seeley said customers are still willing to spend several thousand dollars more on gas-electric hybrids. But trucks are difficult to sell in the current market.

"We've got Ridgelines in the back we've had for a year. "It is a great truck ... but it is a truck, and people are running away from them right now," Seeley said.

CLOTHING CONTINUES TO SELL DOWNTOWN

John Vanlandingham, who owns several downtown businesses in the Old Town Shops plaza, is unfazed by a recent a drop in his sales. He said such a drop is normal as shoppers hold off on some purchases before the holidays.

"We have a seasonal drop as we go into October and prepare for the holidays," Vanlandingham said. "What we are experiencing right now is very typical for this time of year."

He said he is seeing plenty of customers thumbing through the bed, bath and home goodies at P.J. Chilcottage, looking at winter weather gear at Sage Brush Trading Co. and going through the trendy shirts in the Basement Marketplace.

"We are still selling the same things at Sagebrush (which might be a $200 jacket), and we are selling T-shirts in the Basement that are six or seven bucks."

He predicts sales might even top last year's totals.

"Business is good -- knock on wood. We are doing as good or better than we ever have," Vanlandingham said.

ROUTINE MAINTENANCE TAKES A BACK SEAT

Business is steady at Lifetime Automotive as several cars fill the small parking lot in front of the garage, waiting for their turn to be fixed.

Jerry Pabro of Lifetime Automotive said business hasn't dropped off, just changed. Maintenance is being deferred.

"Over the last six months, people are trying to get away from that," Pabro said, referring to routine maintenance like a 60,000-mile checkup.

Pabro said deferring maintenance might save a few dollars in the short term, but is likely going to make future repairs even more costly.

"It is a going to cost you in the end," Pabro said.

DIAMONDS A BIT SMALLER

A recession is not good news for jewelers, said Ryan Terhaar, one of the owners of Frederick Fisher Jewelers.

"Jewelry is a luxury item and it is one of the first things to get cut as far as saving money," Terhaar said.

He said most of his business right now is wedding-related, and he is selling rings that have smaller gems than a year ago.

"If someone was looking at a one-carat ring last year they are probably looking at a half-carat now," Terhaar said. "They are being tighter with their pocketbooks."

Terhaar said the fourth quarter is typically the best time for his family-owned business, as men buy presents for wives and girlfriends. He said he has reduced his inventory, anticipating less sales than a year ago.

"We are cutting back just a little bit in our orders," Terhaar said.

HOME SALES SLOW AS CREDIT DRIES UP

Nancy Branham has spent the last 16 years selling real estate in Flagstaff. She said she believes the local economy is feeling the crunch, but not nearly as much as other communities.

She said her business has slowed down and believes it is more difficult to sell a house than it was a year ago.

"My real estate partner, John Wason, and I have worked very hard this year and will end the year down about 30 percent in sales from last year and up about 20 percent in expenses because homes have had a much longer marketing time," Branham said.

Branham those numbers were due to a number of market conditions.

"Trends we have seen include reduced prices, longer days on the market, many homes going off the market and being rented, many more vacant homes, foreclosures are bringing down the overall value of homes, financing is tougher to get and buyers are just not buying," she said.

Branham said a new tax credit aimed at qualified first-time buyers will help. She said financing is still available as long as buyers have good credit AND a down payment.

"The $7,500 tax credit for first-time homebuyers is a once-in-a-lifetime opportunity," Branham said.

J. Ferguson can be reached at 556-2253 or jferguson@azdailysun.com.

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