Stores scurry to lure back 'spent up' shoppers with slashed prices

January 30, 1995|By Christian Science Monitor

NEW YORK -- U.S. retailers, stunned by a sales decline in December, are scrambling to lure back customers during early 1995.

National chains such as Sears, J. C. Penney and Kmart are holding special clearance sales and slashing prices on selected goods, such as apparel.

Specialty stores and upscale retailers also are discounting some of their more expensive items. National retailer Lord & Taylor, for example, is advertising discount "coupons" on certain items.

"There's a promotional climate out there in general now," said Duncan Muir, a spokesman for J. C. Penney in Plano, Texas. Recently, for example, J. C. Penney stores slashed prices up to 40 to 50 percent on some clothing items. The result: Customers are flocking back into stores, Mr. Muir said.

But, with the threat of higher interest rates and consumers carrying more debt, retailers and analysts wonder if big discounts and flashy promotions will keep shoppers coming back.

"The great challenge for retailers is not just devising corporate strategies and cutting costs, but attempting to attract consumers who are 'spent up' and borrowed to the hilt," said Janet Mangano, retail strategist with investment house Burnham Securities Inc. in New York.

Consumers already are strapped by "high debt levels and slow gains in personal income," Ms. Mangano said. If the Federal Reserve boosts interest rates again this week, that will further curb consumer spending, she said. "That would not be happy news for retailers."

December retail sales slid 0.1 percent, according to the U.S. Commerce Department. And it revised November figures downward, from a gain of 1.2 percent to an increase of only 0.2 percent.

Many retailers blame the clothing-sales slump on the warm weather on the East Coast. It worked against sales of coats and sweaters, said Coleman Nee, a spokesman for Bradlees in Braintree, Mass.

For 1994, the retail industry posted a gain of about 2 percent in real sales growth, excluding inflation, said Kurt Barnard, president of "Kurt Barnard's Retail Marketing Report," a forecasting publication in Scotch Plains, N.J. That is about half 1993's real gain (4 percent).

"Retail sales are down not just because of less disposable income, but because there has been a major shift in consumer spending toward more practical and less expensive products," especially with clothing, Mr. Barnard said. "There's been a sharp relaxation of the dress code at the workplace, which means that people don't have to have designer clothes; and . . . more people are working at home, thanks to the computer revolution."

He predicts that retailers will post real-sales gains of about 2 percent in 1995.

"Department stores must adjust to the new realities" of the marketplace if they are going to be competitive, Mr. Barnard said.

Still, Wayne Hood and Amy Ryan, retail analysts for Prudential Securities Inc. in New York, forecast that sales growth will jump about 6 percent this year (unadjusted for inflation, 2.9 percent after inflation), up from 5 percent in '94. Durable-goods stores, discounters, general merchandisers and department stores will post the best gains, they said.

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