Slumping Retailers Waving Sale Flags
Retailers across the country are slashing prices and stepping up promotions, hoping to stem revenue declines that have mounted since the terrorist attacks.
Nordstrom, famous for a strict schedule of three markdown events per year, launched a special 10-day fall sale aimed at bringing in shoppers who stayed away after the Sept. 11 attacks. Chico’s FAS Inc., a chain of women’s clothing stores that has made news this year for stellar revenue growth, said it also was taking new markdowns to recoup lost sales.
Federated Department Stores Inc., parent of Bloomingdale’s and Macy’s, said its various divisions will extend earlier sales and create new ones to make up for lack of traffic during its regular fall sales event, which had the unfortunate start date of Sept. 10.
And auto makers such as General Motors, Ford Motor and Chrysler are offering more attractive financing.
Today’s bargains aren’t likely to be the last, retailers and financial analysts say.
Many sellers who were counting on stronger fall and holiday sales to make up for a weak first half of the year are still hoping for a consumer comeback. But as layoff announcements and stock market jitters continue to dominate the news, many retailers could still find themselves cutting into slim profits by taking storewide, unplanned markdowns before the holiday season.
Even with early clearance sales, however, there’s still no guarantee that customers will buy, analysts say.
“Smart retailers are being more aggressive with markdowns and enticing consumers into the store,” said Jennifer Black, an analyst with Wells Fargo Van Kasper in Portland, Ore. “There are retailers out there that aren’t doing this, and they’re going to wish they would have, because inventory gets older every day. If they’re waiting and their holiday goods come in while their fall goods are still sitting there, the markdowns are going to be even steeper.”
Many retailers were already discounting merchandise amid lean revenues even before the attacks, as growing layoffs and soaring energy costs sent many consumers to giant discount stores.
Still, economists had hailed consumers’ willingness to spend at all as one of the last defenses against recession.
But since the attacks, which sent sales plummeting 10% to 60% during September, financial experts have scrambled to lower their sales estimates for the fall, holiday season and full year. Several financial experts have warned that this year could see the slowest rate of revenue growth since the recession of a decade ago.
Nordstrom, which has never before offered a fall sale, said it would take as much as 60% off clothes, shoes and accessories.
At Federated, few customers took advantage of its fall sales after the attacks. But store managers honored promised prices because customers had already received direct-mail notices about the sales, even as the company rescheduled the promotion.
Auto makers are taking advantage of low interest rates to offer free-financing deals. Started by GM but quickly followed by Ford, Chrysler and Suzuki, the programs allow customers to spread payments over as many as 60 months on 2001 and 2002 models.
Even so, sales manager Dempsey Nugent of Twin Cities Chrysler Dodge in Lafayette, Ind., worries that it will be next spring before business recovers to even 80% of normal.
“It’s starting to come back. In the last three days business has been picking up,” said Nugent, although sales are half or less of what they would ordinarily be now.
Not all retailers are taking part. In some sectors, such as consumer electronics, pricing is so competitive and planned promotions so plentiful that additional sales probably would do retailers more harm than good, analysts say.
“Once you unleash aggressive promotional activity, you have basically sealed your fate for the season; you risk irrevocably undermining your profit outlook, whether or not the consumer is going to come,” said Matt Fassler, retail analyst at Goldman Sachs in New York.
“Enough aggressive promotions have backfired over the past several years that retailers are more inclined to try to make it work at full price, particularly when there’s some reason to think that any slowdown to date could abate as we distance ourselves from the 11th of September,” he said.
So far, the sales were drawing some customers.
Los Angeles resident Jessica Smith, 26, went shopping last weekend for the first time since the disaster--but only because her work clothes were becoming threadbare, she said.
“I’ve gone over budget before, but today was not going to be one of those days,” she said, showing off two pairs of black trousers, one marked down to $40 from $128, another to $60 from $98. “I wouldn’t have bought these things if they weren’t on sale.”
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Times staff writer Terril Yue Jones in Detroit contributed to this report.
