Lower profits and muted outlooks this week from retailers such as J.C. Penney Co., Macy’s Inc. and Nordstrom Inc. are heightening concern among investors that shoppers’ focus on necessities and buying at discounters could linger well into next year.
At least one mall-based merchant – Tween Brands Inc. – expects shoppers’ fixation on low prices to remain even when the economy rebounds.
“I don’t see how consumer spending turns around anytime before the second half of 2009,” said Ken Perkins, president of research company RetailMetrics LLC. “Where are the new sources of funds coming from for the consumer? Clearly, the earnings reports show that we are living in a discretionary versus nondiscretionary world.”
The divide, seen this week as discounter Wal-Mart Stores Inc. posted higher earnings and raised its outlook, will likely be on display again next week as luxury retailer Saks Inc. and Gap Inc. are expected to announce sluggish results.
Even Target Corp., which is set to report second-quarter results Tuesday, has stumbled in recent months as its stores have a heavy emphasis on clothing and home furnishings.
Penney’s chairman and chief executive Myron “Mike” Ullman told investors after the company reported a 36 percent drop in second-quarter profits and lowered its outlook that he expects “the environment to remain difficult” into next year.
“We know our customers are struggling,” said Ullman, who believes that back-to-school sales will be weaker and occur later this year than they did a year ago.
Like other department stores, Penney is stepping up the number of exclusives it has in the store to differentiate itself from competitors.
For the back-to-school season, Penney introduced six lines aimed at teens and young adults, compared with only one last year. Earlier this year Penney unveiled American Living, an exclusive collection that is part of an alliance with Polo Ralph Lauren Corp. The collection is the biggest brand launch in Penney’s history.