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Retailers need cold wave to heat up sales

Jeff Tyler Oct 12, 2007

Retailers need cold wave to heat up sales

Jeff Tyler Oct 12, 2007


KAI RYSSDAL: It’s been, to be honest, a week of economic dribs and drabs — a housing report here, a corporate earnings figure there… Nothing earth-shattering.

Today stayed true to form. We learned this morning exactly what prices at the wholesale level were doing last month. Going up, as it happens — 1.1 percent overall, but a tolerable 10th percent, once rising energy prices are stripped out.

Retailers had a very so-so week. The Commerce Department said today sales were up, but word from the retailers themselves went the other way — that nobody was buying fall clothing because the weather’s been so warm.

Chains from Nordstrom to Target cut earnings forecasts. Many of them are sitting on piles of inventory they’ll be under pressure to unload in the next couple of weeks. Bad luck for them, but bargains for consumers. Marketplace’s Jeff Tyler gets us going today.

JEFF TYLER: Unsold inventories translate into cheaper prices for you and me. But Richard Hastings, a retail analyst with Bernard Sands, says company profits will suffer as a result of these discounts.

RICHARD HASTINGS: That means the retailer is going to have an increase in mark-down expense, and a decrease in earnings. Ouch! It’s going to hurt.

Hastings says retailers have a few other options besides sales, but they’re not the preferred way to move merchandise.

HASTINGS: You can take it and re-sell it into secondary markets, move it in to a different continent and re-label it. Complicated. Expensive. But that’s another one of the more distressed solutions.

The best thing for retailers would be a spell of cold weather — though, retail analyst Richard Giss at Deloitte & Touche cautions, not rain:

RICHARD GISS: They want the weather to cool down, because they’ve got a lot of seasonal merchandise that they’ve got to get rid of. There’s just something in the human psyche that won’t allow them to buy a coat when it’s warm outside. But they don’t want weather that keeps people at home rather than in the malls either.

Note that he didn’t say “outlet malls.” Giss says retailers prefer to sell discounted merchandize themselves.

GISS: You’d rather sell it yourself, because you can offer discounting on your season-old merchandise, while hopefully getting full price on your new and fresh merchandise that’s coming in the door for the holiday season.

Many consumers don’t start their holiday shopping until stuff goes on sale. Giss says those sales are likely to start earlier this season.

I’m Jeff Tyler for Marketplace.

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