Sep 10, 2012
Retail executives face turbulence heading into holidays
Sep 10, 2012
Shoppers the world over are stressed and forcing retail executives to be both more aggressive and more conservative heading into the year-end holiday period and new year.
U.S. retail executives are not reading too much into a recent uptick in consumer spending growth, while their European counterparts are dealing with shoppers afraid that the region is slipping into recession.
In the face of such prospects, the trick for retailers and consumer brands will be to figure out how to coax shoppers into stores and onto websites without shrinking profit margins through discounting, opening too many new stores or loading up on inventory that could go unsold at Christmas.
"My instinct is, it's just going to continue along on the track that we've been on. I don't see a major halt at any point, and I don't see a major spurt," Jones Group Inc (JNY.N) Chief Executive Wesley Card told a retail conference on Thursday. Jones' portfolio of brands includes Jones New York and luxury shoes Stuart Weitzman.
Top executives from Jones and about two dozen other companies, including Neiman Marcus Group, Ferrari and Marks & Spencer (MKS.L), will be at the Reuters Retail and Consumer Summit this week in New York, London, Paris, Milan and Dubai to address topics such as strategies for the holidays, the growth of "fast fashion" and the latest technologies for letting people shop wherever and however they want.
Retailers have their work cut out for them this holiday season and will need to be innovative.
Target Corp (TGT.N), for instance, said last week it would not be "driving sales at all costs," mindful of bruising price wars of Christmases past. Trying a new approach, the discounter will offer an exclusive line of holiday items in collaboration with luxury chain Neiman Marcus, in an unusual pairing of the kind experts have said they expect more of.
Executives face many dilemmas: how many of their own stores to open compared with how many department stores to sell through, how to use technology to fend off Amazon.com Inc (AMZN.O) and one another, and how to shorten the time between designing items and getting them onto store shelves.
Many top U.S. chains reported strong sales in August. But at the same time, U.S. jobs growth slowed sharply last month, showing how challenging the environment remains.
Across the Atlantic, many British retailers are struggling as meager wage increases and government austerity measures have cooled off shoppers' enthusiasm. Marks & Spencer in July reported its worst sales performance in years. Elsewhere, the debt crisis in the euro zone could plunge the Continent back into recession.
The Thomson Reuters Global Retailers Index .TRXFLDGLPUY4, which tracks 356 retail stocks, is up for 16 percent for the year but has fluctuated a lot amid the economic uncertainty.
One bright spot for retailers has been the high end. Chains like Saks Inc (SKS.N) have been helped by a strong U.S. stock market and an influx of tourists from Russia, China and Brazil that helped make up for a pullback by European visitors.
Saks CEO Steve Sadove does not see Europe's economy "blowing up" any time soon but like many others thinks it will take time for pressure to ease.
"Europe is going through a slow cleanup," apparel and accessories exporter Li & Fung Ltd (0494.HK) CEO Bruce Rockowitz said last week. Li & Fung gets an early read on retailer expectations based on the orders its customers place.
On that basis, Li & Fung is expecting U.S. growth to continue this holiday season and into 2013 despite the persistent clouds over the economy.
"We see that Christmas will definitely come," Rockowitz said. "The order books look very good this year."
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(Additional reporting by James Davey in London and Antonella Ciancio in Milan; Editing by Steve Orlofsky)
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