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COVID-19

Retailers go “conservative”

Marielle Segarra Sep 8, 2020
Heard on: Marketplace
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A reopened Urban Outfitters store in Santa Monica, California. Heading into fall, retailers are being cautious about having too much inventory. Frederic J. Brown/AFP via Getty Images
COVID-19

Retailers go “conservative”

Marielle Segarra Sep 8, 2020
A reopened Urban Outfitters store in Santa Monica, California. Heading into fall, retailers are being cautious about having too much inventory. Frederic J. Brown/AFP via Getty Images
HTML EMBED:
COPY

If you read through recent transcripts of earnings calls from retailers, you’ll notice one word coming up a lot: “conservative.” Conservative in the business, not political, sense.

“We’re going to be conservative on inventory.” — Abercrombie & Fitch executive

“We will continue to plan our businesses conservatively.” — Urban Outfitters executive

“I think everybody’s taking a pretty conservative approach from an inventory standpoint.” — Dick’s Sporting Goods executive

Going into the fall and the holidays, retailers are being cautious about what they buy.

They’re trying to avoid a repeat of this spring. When the pandemic hit, sales plummeted, and retailers had a ton of inventory left over that they paid for but couldn’t sell. They had to offer steep discounts to get rid of it. 

Craig Rowley, a senior client partner at consulting firm Korn Ferry, says when you do that, “you can lose all the profits you’ve gained through the whole season.”

This time around, with all the uncertainty, retailers are just buying a lot less. Sonia Lapinsky, managing director at AlixPartners, said it is a risky bet because if retailers are wrong, they could miss out on potential sales.

“This is their peak selling season, and given such a year of turmoil that we’ve had, it’s really risky for them to run out of stock and just miss that top line,” Lapinsky said.

Lapinsky said some shoppers will likely be disappointed this year —  and find something that they want is sold out. There’s no historical precedent here: Retailers can’t just look back at last year’s sales and know how many winter coats or patio heaters or sleds to order. We’re in a new reality. So they’ve been making a lot of guesses.

“You know, what are going to be the hot items? What are going to be the things that consumers really want? And likely, [retailers are] just not going to have the right bets in all cases,” Lapinsky said.

COVID-19 Economy FAQs

What does the unemployment picture look like?

It depends on where you live. The national unemployment rate has fallen from nearly 15% in April down to 8.4% percent last month. That number, however, masks some big differences in how states are recovering from the huge job losses resulting from the pandemic. Nevada, Hawaii, California and New York have unemployment rates ranging from 11% to more than 13%. Unemployment rates in Idaho, Nebraska, South Dakota and Vermont have now fallen below 5%.

Will it work to fine people who refuse to wear a mask?

Travelers in the New York City transit system are subject to $50 fines for not wearing masks. It’s one of many jurisdictions imposing financial penalties: It’s $220 in Singapore, $130 in the United Kingdom and a whopping $400 in Glendale, California. And losses loom larger than gains, behavioral scientists say. So that principle suggests that for policymakers trying to nudge people’s public behavior, it may be better to take away than to give.

How are restaurants recovering?

Nearly 100,000 restaurants are closed either permanently or for the long term — nearly 1 in 6, according to a new survey by the National Restaurant Association. Almost 4.5 million jobs still haven’t come back. Some restaurants have been able to get by on innovation, focusing on delivery, selling meal or cocktail kits, dining outside — though that option that will disappear in northern states as temperatures fall. But however you slice it, one analyst said, the United States will end the year with fewer restaurants than it began with. And it’s the larger chains that are more likely to survive.

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