Stores employ survival strategies
Retailers try to shed inventory as holiday looms
NEW YORK – Retailers are accelerating their use of survival tactics – slashing prices further and pulling merchandise off shelves to send to liquidators – as the number of holiday shopping days dwindles. But January and beyond look scarier for even relatively healthy merchants as the passing of the holidays give shoppers no reason at all to spend.
What’s worse, the industry expects a rise in returns after the holidays as shoppers seek to convert their unwanted gifts to cash as they struggle with rising layoffs, tightening credit and shrinking retirement funds.
Many retailers are in panic mode as they try to liquidate inventory in a season that’s expected to show the first drop in sales in nearly 40 years. For this last weekend before Christmas, Sears stores are offering up to 70 percent off on fine jewelry and up to 60 percent off on outerwear, while Macy’s is dangling early morning discounts of up to 75 percent. J.C. Penney is featuring 300 early morning specials on items as varied as pajamas and handbags.
Meanwhile, snow and arctic temperatures across the country could make shoppers stay home.
“The retailers are doing everything possible to be lean and clean by the end of Christmas, because the shoppers are not going to be there” in January, said New York-based retail consultant Walter Loeb. “This is more about survival.”
But the casualties from the holidays are rising. Circuit City Stores Inc. and KB Toys Inc. have filed for Chapter 11 bankruptcy protection in recent weeks. And even fairly healthy companies are making big shifts in their plans to respond to the deteriorating climate. Best Buy Co. Inc. announced Tuesday that it will slash capital expenditures by half in 2009 and will offer voluntary severance packages to virtually all its 4,000 corporate employees. The nation’s largest consumer electronics chain also said its third-quarter profits skidded 77 percent.
Best Buy has seen little benefit so far from the bankruptcy of Circuit City, its largest rival, which is closing more than 150 of its approximately 700 U.S. stores by Dec. 31.
Children’s clothing chain Gymboree Corp. is cutting salaries by up to 10 percent for senior management and corporate staff to prepare for what it believes will be a deepening spending slump.
It expects that earnings for 2009 will be below the current fiscal year.
“Consumer demand is much less than most of us understood even in September,” said Richard D. Hastings, a strategist with Global Hunter Securities, who expects total retail sales will fall as much as 8 percent for the November-through-January period.
Even with recent moves to cut inventory and slow store expansion, he said, retailers are finding that their assets – stores and inventory – are “out of whack.”