Retailers sacrifice profits to make up for slower sales
NEW YORK – When it comes to fat holiday discounts, better late than never.
This holiday shopping season, many stores haven’t been offering the same blockbuster deals as they did last year. Instead, they’ve dangled offers of free shipping and no-fee layaways to lure shoppers.
But during the final weekend before Christmas, shoppers should expect to see more “70 percent off” and “buy one, get one free” signs as stores try to salvage a season that so far has been disappointing.
Teen retailer Aeropostale Inc. has slashed prices on everything in its stores by 60 percent. Rival teen chain American Eagle Outfitters is offering 40 percent off all purchases. Saks Fifth Avenue is cutting prices on some designer clothing up to 60 percent. And Children’s Place, a children’s clothing chain, is offering up to 75 percent off on its website.
The sales are aimed at luring shoppers like Jennifer Romanello, who lives in Rockville Centre, N.Y. Romanello, a publicity consultant, is planning to spend $400 less on holiday gifts this season than she spent a year ago. She said she’ll be looking for deep discounts when she heads to stores this weekend.
“I just want to be cautious,” said Romanello, 47, who has two children, ages 12 and 15. “If it’s a great deal, I will consider.”
The price slashing may be good news for shoppers, but it hurts stores. They’re profits likely will suffer in their last-ditch effort to boost sales during the two-month holiday shopping period, a time when they can make up to 40 percent of their annual revenue.
To be sure, stores have been offering discounts throughout the season, but they resisted the blockbuster deals that ate away at profits last year. In fact, promotions and discounting were down 5 percent through Dec. 10 compared with last year, according to BMO Capital Markets, which tracks promotions at about two-thirds of mall stores.
But sales have been slow, and as of Monday, the level of discounting is now even with a year ago.
Now, stores will have to rely even more on the final days before Christmas to make up the sales shortfall. ShopperTrak, which counts foot traffic and its own proprietary sales numbers from 40,000 retail outlets across the country, said Wednesday that the number of shoppers in stores for the week that ended on Saturday fell 4.4 percent from the year-ago period, while sales declined 4.3 percent. As a result, the company said it would slash its sales forecast to a 2.5 percent increase to $257.7 billion, down from the 3.3 percent growth it had initially predicted.
And online sales, which have been seen as a beacon during the season, have been below expectations, too. Online sales are up 13 percent to $35 billion from Nov. 1 through Dec. 16, according to comScore, an online research. That pace is below the forecast of 17 percent for the season.
“It feels like the steam is out of the holiday since Black Friday,” said Bill Martin, ShopperTrak’s co-founder.
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