Reacting to Slow Sales

For most retailers, October 2007 sales were somewhat softer than in previous months. The “whys” include: weather (September and October 2007 were warmer than the same months in 2006), sub-prime loans, declining home values, the stock market, the crisis in Pakistan, etc. There are many reasons for consumers to hold on to their money.

The critical question is: How will each retailer respond to this unfortunate reality? In some cases, retailers avoid making the hard choices and push the day of reckoning into the future. They don’t take timely markdowns, and they slow the flow of new inventory into the stores. This approach provides some short-term P&L relief, but the retailer suffers later on with higher-than-planned mark-downs compounded with lost sales on fresh merchandise.

Trends in Retail SalesNote: The information contained in this report has been obtained or developed from sources which we believe to be reliable, including but not limited to information published by the companies named in this report, but we disclaim responsibility for the accuracy of such information or for any use of such information by a reader of this report.
Department storesOctober ’0790-Day Trend
Bon Ton–1.4%–2.8%
Macy’s Inc.–1.5%–1.3%
Premium department storesOctober ’0790-Day Trend
Neiman Marcus8.5%6.5%
Saks, Inc.10.6%11.4%
Midline storesOctober ’0790-Day Trend
J.C. Penney–1.8%–3.5%
Stage Stores–2.9%–1.0%
Mass merchantsOctober ’0790-Day Trend
Family Dollar0.0%0.5%
Wal-Mart-U.S. Stores0.0%1.1%
Warehouse clubsOctober ’0790-Day Trend
BJs Wholesale4.8%3.4%
Costco U.S.7.0%4.0%
Off-priceOctober ’0790-Day Trend
Ross Stores–1.0%0.9%
Stein Mart–3.8%–6.3%
Specialty storesOctober ’0790-Day Trend
Abercrombie & Fitch–2.0%0.6%
American Eagle Outfitters–3.0%2.3%
Ann Taylor–4.2%–0.4%
Children’s Place2.0%1.0%
Christopher and Banks22.0%9.7%
Hot Topic–4.0%–2.6%
JoS. A. Bank Clothiers1.8%3.1%
Limited Brands–6.0%–3.2%
Pacific Sunwear–0.8%5.0%
Drug storesOctober ’0790-Day Trend
Longs Drug Stores0.2%1.4%
Rite Aid0.4%0.7%

The strongest retailers recognize the real cost of this short-term strategy and avoid it. On Oct. 11, Nordstrom acknowledged the situation and took action. While the company reported positive same-store sales for September, it didn’t achieve plan and had inventory levels above plan. Blake Nordstrom, president of Nordstrom, Inc. explained, “We are taking immediate action to bring inventory levels in line, which will negatively impact merchandise margins for the remainder of the year.” Nordstrom should be applauded for choosing to deal with the situation head-on instead of pushing the problems into the future. Other retailers need to decide what actions they need to take now to avoid a much greater total cost in the future.

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Robert Gordman is the president of The Gordman Group, Denver, and is the author of “The Must-Have Customer—7 Steps to Winning the Customer You Haven’t Got.”

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