By Dhanya Skariachan, Lisa Baertlein and Phil Wahba
CHATHAM, N.J./LOS ANGELES/WHITE PLAINS, NY, Nov 27 (Reuters)
– T he 2013 holiday shopping season may end up being remembered
for its ugly sweaters and, for many retailers, even uglier
discounts.
With growing online competition, no fashion must-haves and
weak consumer confidence, most U.S. retailers will have to offer
both big discounts and stellar service to get consumers to spend
freely, according to retail analysts who joined Reuters
reporters on visits to stores in New York, New Jersey,
California and Illinois ahead of the holiday season.
“People are being a lot more selective in where they spend
their money,” said Wedbush analyst Gabriella Santaniello while
touring the Westfield Topanga mall in Canoga Park, California.
To be sure, with online sales increasing, store visits
provide only part of the picture. Still, a trip to the mall with
a trained expert provides vital clues ahead of the holiday
season, which usually accounts for almost half of retailers’
profits.
The battle for the consumer dollar is particularly intense
in a year when taxes have risen, unemployment has remained
stubbornly high, and confidence has taken a hit from the recent
government shutdown and uncertainty over the introduction of
President Barack Obama’s healthcare reforms.
Offsetting those negatives has been the wealth impact of a
rise in home prices and a rallying stock market, though that is
more likely to help the luxury end of retailing.
Most industry estimates see sales growing modestly
overall, with online retailers taking a bigger slice of the pie,
and electronics stealing share from apparel.
SEASON OF SWEATERS AND XBOXES?
In a sign of intense competition, there has already been
unprecedented price-cutting from the giant discount chain
Wal-Mart Stores Inc, earlier-than-usual deals from
online goliath Amazon.com Inc, and price-match promises
from Best Buy Co Inc, Target Corp and others,
even before the season’s unofficial kickoff on Thanksgiving Day.
Wedbush’s Santaniello is betting on Urban Outfitters Inc
, American Eagle Outfitters Inc, and other
purveyors of trendy sweaters featuring cutesy animals, phrases
such as “totes amaze” (slang for totally amazing) in curly
cursive, and “fair isle” patterns.
“This is going to be a Christmas of ugly sweaters. That’s
the hip thing now, bad sweaters are so cool,” among 20- and
30-year olds, she said, eyeing an Urban Outfitters tan sweater
with a pair of foxes knitted into the pattern of the garment, a
technique known as intarsia.
New must-have gadgets such as Sony Corp’s
PlayStation 4 and Microsoft Corp’s Xbox One gaming
consoles and Apple Inc’s latest iPhones and iPads could
take a bite out of other holiday gift purchases and hurt some
apparel chains, according to analysts.
“There’s a limited wallet, and there’s going to be a lot of
competition from outside the apparel space, which means teens
are going to be spending much less money on clothes,” said
Bridget Weishaar, a retail analyst with Morningstar.
A visit to a Best Buy store in Chatham, New Jersey, gave
analyst Scot Ciccarelli a reason to recommend the retailer’s
stock to investors this holiday.
At least four sales associates offered to help Ciccarelli
within 20 minutes of entering the store, a huge improvement from
last year, the analyst with RBC Capital Markets said.
“The simple fact that people are asking you, ‘Can I help?’
and are nice and friendly,’ is the big difference,” Ciccarelli
said, showering praise on Best Buy’s new management team for
investing more in training its sales associates. Best Buy’s
share price has more than tripled since last holiday season as
results have improved.
Wendy Liebmann, CEO of WSL Strategic Retail, expects teen
apparel chains to offer bigger discounts closer to Christmas
because fashions are “banal” this year and interchangeable, and
teens have been trained to wait for the best deals.
TALE OF TWO DEPARTMENT STORES
Craig Johnson, president of consulting firm Customer Growth
Partners, praised Nordstrom’s selection of jeans and
shoes, and said he expects the department store chain to have an
“okay” season, though not a blockbuster one because even wealthy
shoppers are holding back and looking for sales.
During a visit to its store in Westchester Mall, in White
Plains, New York, he said he was impressed by its new in-store
signs that can be seen from afar and clearly tell shoppers where
they can find “power” brands like “Theory,” “Vince” and
“Burberry Brit,” which are especially popular with upscale
shoppers.
Macy’s hasn’t raised its annual sales forecast, but
Liebmann expects it to have a solid holiday season because of a
good selection of products and because it is well ahead of some
rivals in integrating stores and e-commerce, which includes
filling online orders from stores.
Liebmann found the level of discounting at Macy’s flagship
Manhattan store muted, which he said would give it room later in
the season to cut prices without going down to alarming levels.
“This is just the beginning, but they’re not giving it away
yet,” said Liebmann, pointing to deals such as 25 percent off on
Calvin Klein men’s shirts.
At troubled department store chain J.C. Penney Co Inc
, analysts had mixed views about overstuffed racks of
clothing, with some seeing it as a sign of weakness and others
that the company was trying to prove to shoppers that it had
overcome recent troubles – which included under-stocking of some
store brands.
“What one may misconstrue as clutter is merely a strategic
effort to meet high customer demand,” said Penney spokeswoman
Daphne Avila.
(Reporting By Dhanya Skariachan in New Jersey, Lisa Baertlein
in Los Angeles, Phil Wahba in New York and Nivedita
Bhattacharjee in Chicago; Editing by Jilian Mincer, Christian
Plumb and Ken Wills)
