Deep Discounts Not Expected to Spark Lackluster Shopping Season
Even as the most disappointing holiday shopping season in a decade wound down Monday, retailers continued their ceaseless wave of discounting in a last-minute scramble to clear store shelves.
AnnTaylor Stores, American Eagle Outfitters and other chains used discount cards redeemable after the holidays to draw shoppers, while retail Web sites were ablaze with offers of low financing and steep discounts on everything from sweaters to exercise equipment.
Price markdowns accelerated during the last week at apparel companies hamstrung by a lack of must-have fashions and unseasonably warm weather, said Stacy Pak, a San Francisco-based retail analyst with Prudential Financial. Anxious apparel retailers marked down 58% of items being sold last week, a slight increase from the previous week, Pak wrote in a report released Monday.
During recessions, retailers typically discount even deeper after Christmas to clear seasonal merchandise off shelves. But post-Christmas discounts might not go much deeper this year, analysts said, because many retailers trimmed orders early in the season rather than risk being saddled with unwanted merchandise.
Traditionally, the week after Christmas drives about 10% of the holiday season’s overall revenue. But, though the day after Christmas typically draws hordes of bargain hunters, it rarely finishes among the top 10 sales days.
It’s unlikely that the flurry of promotional activity drew enough shoppers to rescue a lackluster season hampered by the recession, reports of increased layoffs and consumer fears generated by the events of Sept. 11.
Most industry analysts are sticking with forecasts of a 1% to 2% revenue increase over the 2000 holiday season--the lowest increase since 1990 when sales were flat.
A real cure for the retail industry’s malaise, observers say, isn’t likely to emerge unless merchants can unveil an attractive line of goods when spring merchandise surfaces in the weeks following New Year’s Day.
Finding that blend of merchandise could be a challenge. Pak reported that struggling Gap Inc.’s Gap, Old Navy and Banana Republic chains each “got new merchandise and it still looks bad. Markdowns accelerated at all three chains.”
Wary of Spending Freely
The unanswered question is how badly retailers’ profits will be eroded by the never-ending string of discounting.
Many consumers simply haven’t been moved to spend freely, despite the decidedly promotional nature of the holiday shopping season.
“It never really began to feel like Christmas,” Costa Mesa resident Cathy Cotrill said Monday afternoon. “The economy has a lot to do with it, and so does all of the other things that have happened.”
Cotrill and husband, John, spent part of Monday shopping at a Target Greatland store in Costa Mesa, leaving shortly after noon with two shopping carts filled with presents and stocking stuffers. “I woke up this morning and decided I was going to finally spend some money,” said Cotrill, who works at an animal hospital. “I don’t think people were getting in the mood for shopping this year.”
A handful of retailers on Monday released preliminary sales information for what’s typically the busiest shopping weekend of the retail season. J.C. Penney Co. on Monday reported that last week’s sales began slow, but “picked up over the weekend,” putting the Plano, Texas-based chain on track for a 3% to 4% increase during the last week before Christmas.
Michael Gould, chairman of Federated Department Stores Inc.’s Bloomingdale’s division, on Monday reported “a very good, very solid weekend ... Friday, Saturday and Sunday combined beat last year’s weekend, and Sunday turned into a nice surprise.”
Looking for Value
Target Corp. credited strong consumer interest in entertainment, electronics, domestic goods and home decor items with pushing the corporation’s sales “above plan” for the last week. The Target chain reported sales increases in line with the first two weeks of December, but the company’s Mervyn’s and Marshall Fields operations were “below” plan for the week.
Several retailers, including Wal-Mart Stores Inc., are scheduled to release preliminary sales figures for the last week Wednesday.
Those reports are expected to underscore the fact that consumers are gravitating toward Wal-Mart, Target and other chains with better values, usually at the expense of department and specialty stores.
Several closely watched retail industry surveys, including reports from Instinet Research’s Redbook division, Houston-based Telecheck and the International Council of Shopping Centers, also will be released on Wednesday.
