With two weekends left before Christmas, retailers face warmer weather and consumers are waiting for the “big sale.” Some retailers already have pulled the trigger on their promotions as a way to drive traffic, which will likely bolster top-line growth.
But will the markdowns be at the expense of lower gross margins? Some analysts don’t think so. The promotions are well executed and planned, especially at the specialty retailers. Still, there is a lot of inventory in the market, and at least one analyst believes planned sales could turn into unplanned markdowns as early as the beginning of next week.
In the department store sector, Dana Telsey, chief research officer at Telsey Advisory Group, said the sales are well planned and in line with expectations. She was in the midst of a national retail check Thursday and was pleased with what she saw in the sector.
“The department store retailers are in check, relative to what we’ve seen in the past,” Telsey said. “Retailers were very aggressive on Black Friday, then it slowed down, and now we’re in the second phase of the holiday season. We definitely are seeing markdowns to move the merchandise. A lot of these markdowns are planned markdowns built into retailers’ margins.”
Telsey said stores are going through a transition right now. “Inventory levels are lean,” she explained. “You’re seeing a transition to new inventory levels with new ‘transitionwear’ between winter and spring. That is beginning to come into stores now. There’s more frequent flows of new product, which helps to maintain full prices.”
Telsey said the promotions scream sales but are not any steeper than prior seasons. Still, there are retailers that are accelerating their markdowns.
In the specialty channel, promotional activity also is planned. “There are a lot of sales going on right now, but much of it is planned promotions instead of reactionary price slashing. You may look at retailers such as Coldwater Creek, Victoria’s Secret, Express and others and say, ‘They look very promotional.’ But the sales are [scheduled], and I would say retailers [in the specialty sector] are right on plan,” said Mark Montagna, analyst at CL King & Associates.
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Montagna said some retailers, such as Gap, are not faring as well as others this holiday, and they could be forced into making steep, unplanned markdowns. “It depends on [who] you are talking about. It is company-specific,” he said.
The analyst said the planned markdowns in the market right now are easy to spot because of the signage. “You’re not seeing any handwritten, ‘50 percent off’ signs right now,” he said. But that could change.
Walter Loeb, analyst at Loeb Associates, said retailers are dealing with several hurdles, such as warmer-than-normal temperatures across most of the U.S. as well as a weaker housing market, “which is making people feel less rich,” he said. This consumer sentiment could negatively impact department stores.
Loeb said he expects retailers to move from planned markdowns to slashing prices during unplanned sales after this weekend. “And I don’t think gift-card redemption after the holidays will make up for those sales,” he added.
“Retailers want to be lean and clean by the end of the season with as little liability as possible,” Loeb said, adding that troubled segments this holiday include outerwear and apparel. Stronger-performing categories so far have been accessories, shoes, handbags and jewelry, Loeb said.
Eric Beder, a Brean Murray Carrett & Co. analyst, said in a research note earlier this week that he is “pleasantly surprised at the margin cohesion and inventory levels we are seeing from most of our [coverage] universe. This coming week should be crucial, as virtually all the product ‘bets’ have been made.”
Beder’s top picks for holiday winners in the specialty sector include companies such as Bebe Stores, Guess, Blue Holdings, Caché and True Religion.
A quick retail check over the past week and a look at national print advertising Thursday showed heavy promotions across retail channels.
Bloomingdale’s was offering 25 percent off a selection of cashmere cold-weather accessories, while a separate ad in Thursday’s newspapers touting 20 to 60 percent off furs, outerwear, sportswear and other items during a sale beginning Thursday and ending Tuesday. In another ad, Macy’s promoted 50 percent off, “plus an extra 15 percent” on natural/dyed fur-trimmed or mink coats from its Fur Vault.
Lord & Taylor’s ad pitched 50 percent off cold-weather accessories, children’s outerwear, men’s outerwear and women’s down and fake-fur coats. Cashmere sweaters, sleepwear and cubic zirconia jewelry also were reduced.
In specialty store retail checks by Brean Murray Carrett & Co. and Jennifer Black & Associates as well as phone calls to stores made by WWD, promotions were light to nonexistent at Abercrombie & Fitch, American Eagle Outfitters and J. Crew.
A sales associate at an Abercrombie & Fitch store in the Park Meadows Mall, Littleton, Colo., said there was just the “usual clearance rack of merchandise” that included T-shirts, long-sleeved button-downs and hoodies. The Freehold Raceway store, in Freehold, N.J., echoed a similar take on a lack of sales.
At Hollister, fleece was on sale for $29.50 from $49, and camis were as low as $9.99. American Eagle offered aerie underwear, five for $20. At Ann Taylor, outerwear was 25 percent off, while select cashmere items were buy one, get the second for 50 percent off.
Gap stores were deep in sales, with window promotions touting “up to 40 percent off.”
A sales associate at the Gap at Roosevelt Field Mall said, “There is stuff everywhere in the store for $20 or less.”
On Thursday afternoon, Sears Holdings Corp. said in a statement that it was extending store hours “and [offering] special deals this weekend to help shoppers beat the last-minute rush the weekend before Christmas.”
Some of the specials include 30 percent reductions on consumer electronics, tools and home goods.