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Retailers Do More With Less Inventory

Saks and Macy's are among the retailers showing new discipline in response to the slowdown in consumer spending.

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Since retailers don’t want to be caught off guard again, markdowns will become “more strategic, rather than rampant, to reduce inventories. There will be less of a panic and more of an orderly process,” Lundgren said.

That may even result in empty shelves in some cases.

Lou Amendola, chief merchandising officer of Brooks Brothers, said inventories have been cut back so far that the chain actually had some popular items sell out for Father’s Day: “It was like the old days. Hopefully we’ll train customers to buy things quickly before they’re gone.”

Among the items that sold out were men’s polos with contrasting colors on the collars, madras sport shirts and purple gingham shirts. He said that the goal for holiday is to continue to “keep inventories very lean” — so much so that consumers will be faced with a “scarcity.”

Amendola said that inventories on basics such as white shirts or underwear are down 10 percent and the store is leaning more heavily on its suppliers to speed up replenishment. “We don’t have to keep as many weeks of supply,” he said.

In fashion goods, however, inventories at Brooks Bros. are down between 15 and 25 percent. “This allows us to have more open-to-buy available and keep our inventories fresh. We think that when customers see large quantities of the same items, they think we’ll still have it a month from now and prices will be reduced further,” said Amendola. He explained that while one cannot disappoint on core basics, “it’s OK to sell out of a purple shirt or an outerwear item.”

“I think retailers and wholesalers are realizing that you can be more profitable but don’t have to have more inventory,” he concluded.

“Selling out is a good thing,” said Saks’ Sadove. “In the luxury market, it’s all about exclusivity and limited supply.” By having product disappear from store shelves, “the result will be better margins and fewer markdowns.”

But, Sadove said, once again it’s a balancing act between creating demand and not disappointing customers. “If you have too little merchandise, it won’t feel like you’re in business. And we still need to represent the trends and fashions that we want for the consumer, but we can’t have too much.”

He noted some stabilization since the “free fall” that began in September, but pointed out consumers are still seeking deals when they do hit the stores. “Things will recover, but people do respond to sales,” he said.

Not every retailer has dropped inventories in the double-digit percentage range.

Mindy Meads, president and chief merchandising officer at Aéropostale Inc., said, “Our inventories were down 4 percent in total and 13 percent per square foot at the end of the first quarter due to stronger sell-throughs. We are managing our inventory very closely and have been able to react to customer trends. We have been buying conservatively and remaining nimble using fabric contingencies and improved product flow strategies.”

Aéropostale, however, has had atypical sales results — in May, April and March, its comparable-store sales grew 19, 20 and 3 percent, respectively.

Wesley Card, ceo of Jones Apparel Group Inc., noted in the company’s first-quarter conference call on April 29, “Retailers continue to keep inventories in line through promotions and events, and we did the same thing in our own chain of retail outlets and regular price stores where we kept inventories very well controlled through the period.”

Battling to move ahead in an environment that’s been especially tough on his sector, jewelry designer Steven Lagos noted it’s now necessary to be focused on productivity above all else. He explained that while stores in general are adjusting inventory levels downward and looking to prevent stock bloating wherever it might surface, it is paramount that retailers not “get caught with a lot of markdowns. That’s very healthy in a macro sense. We see stores getting better at taking action and improving the merchandise mix.”

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