Anxiety Rises Over Holiday Season

B-t-s performance raised caution level despite some encouraging signs.

At an RBC Capital Markets consumer conference in New York this month, David Levin, Casual Male Group Retail Group Inc. president and chief executive officer, said holiday will be “challenging” but it “won’t be as promotional” as last year, partly because inventories will be so lean.

Another panelist, Robert Humphreys, Delta Apparel Inc. chairman, president and ceo, said lower inventory levels could give retailers a “unique opportunity to retrain the consumers” to shop at full-price points. But that idea was quickly rebuffed by Urban Outfitters Inc. chief financial officer John Kyees. “It only takes a handful of people to match price,” he said.

“Even though most companies hope to have fewer discounts year-over-year, we will still see markdowns — just not as severe,” Wedbush Morgan’s Chen said.

Noting the heavy markdown activity needed to coax consumers into buying in August, Pali Capital retail analyst Amy Noblin agreed. “I don’t want to seem negative or doom and gloom,” she said. “I am not in an alarmist phase, but I think we will see this [behavior] in holiday. The consumer will not come out as rapidly as people think.”

Most experts are in agreement on one thing: a major catalyst driving demand will be the consumers’ continued focus on value.

“For holiday, retailers are better prepared, but the consumer is still looking for deals,” said Esteban Bowles, a principal in the retail practice of A.T. Kearney. “Retailers that will continue to do well will have more attractive prices.”

Kurt Salmon Associates vice chairman Peter Brown noted although the fall will likely carry an air of recovery, retailers will be in for a “very tough holiday.”

“In the fall, we will start to see what appears to be an improvement,” he said, as we will be “lapping the Bush stimulus” and the anniversary of last September’s financial collapse. “But the consumer has got to continue to deleverage.”

The retail world will be hard pressed to adjust to fundamental changes in consumer psychology, said Erin Armendinger, managing director of the Jay Baker Retailing Initiative at the Wharton School of the University of Pennsylvania.

Consumers have been “trained” to shop later, she said. “We’ve always operated on a fashion schedule. Maybe we should operate on a consumer schedule. Maybe people don’t buy winter jackets in August. They buy them when it gets cold.”

In order to appeal to this consumer, “smart companies are doing more than just cutting inventory,” she said.

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