Midtier apparel retailers are gearing up for a holiday showdown, and analysts say off-price players could come out on top, leaving department stores and discounters fighting for middle-market share.
Department stores such as J.C. Penney Co. Inc., Sears, Roebuck & Co. and Kohl's Corp. created a buzz this weekend with "Super Saturday" sales that offered shoppers deep discounts on apparel and home goods. Then on Tuesday, J.C. Penney and Kohl's each had storewide sales that included apparel promotions of 30 to 50 percent off.
The promotion mania comes as analysts expect tepid holiday sales, which would follow a weak back-to-school season and soft September same-store sales. Retailers report October comps today, and expectations are low.
"When retailers report monthly sales, I think it will be very disappointing," said Walter Loeb of retail consulting firm Loeb Associates. "I believe that the hot weather discouraged customers from buying any winter apparel or even warm underwear. As a result, I estimate a reduction in traffic of 13 percent. Because of the lack of business for retailers in general, I believe there are unplanned inventory accumulations, which will result in extra markdowns and more sales in order to clear the merchandise and allow retailers to have, in the last nine weeks of the year, product that is desirable."
Soaring energy prices, food inflation and the slowdown in the housing market have generated apprehension in the economy, leaving retailers unable to wait until Black Friday to jump-start holiday deals.
With advertisements such as "The Biggest Sale of Them All" at J.C. Penney and "100 Early Bird Specials" at Kohl's, shoppers transitioned into Black Friday mode just as Halloween ended.
"There is a new circumspect consumer who is more thoughtful and price-conscious," said Craig Johnson, president, Customer Growth Partners. "No one wants to pay retail; everyone wants to get or think they are getting a deal."
According to a study by BDO Seidman LLP, an accounting and consulting firm, 73 percent of chief marketing officers at U.S. retailers said discounts and promotions will be more robust this holiday compared with 2006 due to the current credit crunch.
These concerns have made 64 percent of the chief marketers more cautious in their sales and inventory purchase plans. "When you consider that discounting was widespread during the 2006 holiday shopping season, the forecast of even more discounting this season communicates both a growing anxiety among retailers about reaching sales goals and the potential for value buying for consumers," Al Ferrara, partner in the Retail and Consumer Product Practice at BDO Seidman, said in a statement.
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