THE HOLIDAY RUSH : Counting on Christmas : Apparel Merchants Slash Prices, Offer Special Deals to Boost Lackluster Sales

Disappointed with consumer spending as Christmas nears, apparel merchants are pushing bargains in a last-ditch bid for a late-season turnaround from their long-running sales slump.

They are offering lottery-like “scratch-off” cards entitling customers to discounts. They’re giving away free merchandise with a minimum purchase. And they’re offering gifts, gift certificates and discounts of 50% to the growing number of bargain-hungry consumers who know that good things come to those who wait.

Late-hour discounting is nothing new during the holidays, of course. It has become an article of faith among Christmas shoppers that the longer they wait, the better the price. Indeed, a poll by the Gallup organization last weekend found that only one-third of shoppers were finished. And of those who weren’t done, 17% hadn’t even started.

But specialty clothing retailers are a special case, coming off a three-year slump that has been blamed on everything from the aging of the baby boom generation to the trend toward “dressing down” at work and tough price competition from department stores.

The industry was counting on the holidays to break the logjam. But warm weather in much of the country hasn’t helped the cause. Instead, the Gallup survey on behalf of Arthur Andersen & Co. found that consumers are spending only 35% of their holiday budgets on clothing--about 5% less than the industry was counting on.

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Specialty apparel chains offering ready-to-wear clothing suffered a 4% decline in sales from January through October, 1994, said Mark Schoifet, spokesman for the International Council of Shopping Centers, a trade group that monitors sales of mall retailers.

And there hasn’t been much of a rebound during the holiday shopping season, Schoifet said: Specialty apparel retailers have only seen a 2% increase in sales between Thanksgiving weekend and Dec. 18. Thus, they’re pulling out all the stops.

“The mall segment of the industry is hopeful that some of the large specialty retail chains can turn it around,” Schoifet said.

Two apparel chains that exemplify the disappointing season to date are Merry Go Round Enterprises--operator of the Merry Go Round, Chess King and Dejaiz chains--and the Limited Inc.

Merry Go Round filed for Chapter 11 bankruptcy protection in January, 1993, and is now reorganizing with a new mix of clothing and high hopes for a turnaround. The holiday season is crucial to this effort because it’s the usual source of 30% of its sales and 40% of its profits.

Going into the holidays, Merry Go Round was offering consumers $30 jeans for $18 on an overall purchase of $50 or more over the past three weeks. The company also sold some dresses for $10 to $20 off earlier this month. But that wasn’t enough.

So, the Merry Go Round store chain is now offering a new promotion that will be effective until Christmas: For every two garments a customer buys, he gets a third garment of equal or lesser value for free.

“Sales have been disappointing but not catastrophic,” said Tom Shull, chief executive at Merry Go Round Enterprises. “We’ve hit bottom, but we’re on our way back up.”

Industry analysts say sales have also been disappointing at the Limited, Inc., the nation’s largest specialty store operator. Sales at Limited stores decreased 3% for the ten-month period ended Nov. 26. And for November alone, sales fell 4%.

The Limited attempted to boost sales earlier this month by offering Lotto-like cards to people making purchases. Under this retail game, some customers won discounts of up to 50% by scratching off the cards and presenting them at checkout stations.

Last weekend, Limited stores tried a different incentive: gift certificates of $10 for pre-Christmas purchases of $10 or more.

While such specialty retailers stage these seasonal promotions, many department stores have taken business away by staging sales events year-round--a merchandising practice that they advertise more heavily in December, said Alan Millstein, a New York-based apparel analyst.

“The mall-based specialty retailers have had difficulty coping with the heavy newspaper and television advertising of the department stores and their one-day sales events,” Millstein said. “Department stores are masters of self promotion and chains like the Limited, the Gap and Merry Go Round are sleeping giants. The specialty chains do a pathetic job of creating sales events compared to the department store chains.”

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J.C. Penney is among the department store chains relying heavily on broadcast and print media to promote sale items during the final seven shopping days before Christmas. The chain is also offering an extra 10% discount to Penney credit card holders. And Mervyn’s--which gets 80% of its sales from apparel--held a three-day sale last weekend, then launched its “Last Minute Countdown” sale Tuesday through Saturday. The chain is offering discounts of 20% to 50% during its “countdown” week.

“We know last-minute shoppers will be out in droves and we want them in our stores,” said Carol Johnson, a Mervyn’s spokeswoman.