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Archive for Friday, July 16, 2010

Even in heat of summer, retailers are already feeling a holiday shiver

July 16, 2010

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— It may be hot and sticky outside, but stores across the nation are already getting a chill thinking about Christmas.

Retailers are having second thoughts about orders they placed earlier this year, when the economic recovery looked stronger and Americans were more willing to spend money. Now they worry they could end up stuck with too many toys and sweaters come the holidays and have to cut prices.

Stores are fretting that even small increases in their holiday stocks for this year may be too ambitious. Some are waiting to see how spending turns out in the back-to-school season before trimming their holiday orders, but others aren’t wasting any time.

“I was feeling fantastic in March, and we were doing great. But then things started slowing down,” said Lauren Phalin, who owns a New Jersey children’s and teen clothing shop called Rocking Horse and canceled a $2,000 dress order in May.

“As long as I keep inventory and expenses down, we can still do fine,” she said.

Most stores have until August to do any tweaking on their holiday orders, though the largest chains, which have more power over suppliers, can cancel some orders later.

A lot is at stake: For many retailers, holiday business accounts for as much as 40 percent of revenue and profits, says Ken Perkins, president of research firm RetailMetrics. For toy sellers, it’s half.

With unemployment stuck near 10 percent and the stock market having wiped out its gains from earlier this year, Americans are skittish about spending as the second half of the year begins.

Retail sales fell 0.5 percent in June compared with the previous year, the government reported this week. Clothing chains had to slash prices on summer tops and shorts even more than they planned to entice customers.

Now, stores worry that merchandise will start piling up — back-to-school supplies first, then holiday trees and coats, leading to rampant price-cutting.

“It still feels like a fragile economy,” said Brendan Hoffman, CEO of Lord & Taylor, which has plans in place in case sales slow down. Hoffman said that if business weakens, the department store will turn to more aggressive promotions.

Stores are still smarting from the huge discounts that made Christmas 2008 a disaster. They desperately want to avoid a repeat and have been cautiously increasing how much they put on store shelves.

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