Tuesday, July 7, 2009

News Article On Sales

"Thanks!" to RatsOnParade (in this post) who shared an interesting article from the WSJ (click here) about Back-To-School (already?) sales, with an interesting quote about J.Crew.

Stores Anxiously Watch Back-to-School Sales
July 1, 2009
By Karen Talley, Ann Zimmerman, & Vanessa O'Connell

Retailers that spent the last six months slashing inventories are now anxiously awaiting the back-to-school shopping season for clues that customers aren't turned off by the slim selections in stores.

Worried about getting stuck with products that recession-wracked shoppers won't buy, some chains have cut stocks by as much as 20% compared to prior years' levels. They may continue to empty their shelves if back-to-school sales are slow -- raising the possibility of another dreary Christmas. ...

"If consumers don't spend money on their children during the back-to-school season, you can bet there won't be good holidays," said Paul Bingham, managing director of global commerce and transportation for IHS Global Insight, an economic forecasting and analysis firm.

Many retailers place their Christmas holiday orders during the summer and early fall, making back-to-school sales an important indicator of consumer sentiment. Mr. Bingham said the bulk of holiday purchases from Asian manufacturers arrive in the U.S. by October, leaving little room for error.

U.S. back-to-school spending is expected to hit $38.3 billion, up 0.6% from 2008, according to an estimate by the International Council of Shopping Centers. That would be a slight improvement from last year, when sales were flat compared to 2007.

Mr. Bingham expects retailers will remain very cautious, not buying much merchandise on speculation even as the recession lifts because consumers' appetite and ability to spend will continue to be hampered.

Retailers said they would rather run the risk of running out of merchandise than suffer mark downs to move excess goods. The last thing they want is a repeat of last Christmas, when a sudden fall-off in consumer spending left them with mountains of merchandise they were forced to discount, leading to sharp drops in profits.

"It's better to sell out right now than to have to mark down," said Jenna Lyons, J.Crew Group's creative director.

... Some retailers say the lean inventories may remain regardless of the summer's results. Gap Inc. has been tightening its inventory -- on a mandate from Chief Executive Glenn Murphy -- since 2007. The San Francisco casual-apparel company reduced inventory 10% for the first quarter of this year and projected double-digit declines for the second quarter.

Mr. Murphy said that merchandise orders in the past have reflected the optimism of merchants rather than the reality of consumers. "Everybody gets excited, and then the inventory team buys into the optimism," he said this month. "Our inventory management now is strictly based on facts."

Other retailers are becoming more precise in setting inventory levels. Target Corp., for instance, has begun to tailor its stocks to the rate of sales at individual stores, instead of stocking the same amount of merchandise in every store.

Cost saving measures such as inventory cuts have helped preserve the Minneapolis retailer's gross profit margins. "Inventory management continues to be a major focus for Target," a spokeswoman said. All this hesitation, however, may mean that come Christmas, retailers could be scrambling. Todd Slater, an analyst at Lazard Capital Markets, expects retailers to be "chasing inventory, rather than trying to buy upfront" for the holidays.

The quote from J.Crew's Jenna Lyon's seems to reflect what J.Crew has been doing in the past few months, which is to reduce inventory levels. Aficionadas not only have seen new arrivals selling out in a few days, but have mentioned that J.Crew is eliminating sizes (refer to "The Latest On J.Crew Sizes {for now anyways} ;)" post).

What are your thoughts on the article? Do you disagree or agree with J.Crew's inventory strategy, as mentioned by Jenna Lyons? What do you think J.Crew should do?


  1. I have definitely noticed less stock being kept in stores. It seems that once my size sells out there are not any more being restocked. It can be frustrating...online is selling out quickly too.

  2. Not bothered by it. There will always be cute clothes. If I miss something, there will be tomorrow/next season!

  3. I, for one, am bothered. Jenna's statement seems to completely contradict the desires of the consumer in a recession. Given the discrepancy between what J.Crew pays to produce their merchandise and what we, as consumers, pay to own it, wouldn't it make sense to debut new items at a slightly higher than average price point, then reduce them to move inventory and at least make the customer feel as though he/she is getting some kind of promotional pricing?

  4. I didn't realize back to school indicated holidays!
    I have about half of my holiday shopping already done.
    I agree with Genny, there will always be something cute out there.
    I haven't really liked most of JCrew's new stuff much lately anyway. I can't pay $45+ for a tshirt.

  5. Thanks for making this into a post, Alexis! I think I've said this before, but I've been making quite a few full-price purchases lately on new arrivals. Something that just a year ago I would never dream of doing! In the end it seems like many of the things I've purchased still end up in the sale section sooner or later, which causes the "re-order and take back the original" syndrome. Overall, though, I haven't had that happen too often. And I'm actually a little glad there's less inventory nowadays -- so I don't have to see myself walking around every corner. I kind of like thinking that my special $45 t-shirt really is special. :)

  6. Anne,
    Oh, thank goodness I am not the only one! I agree completely $45 for a t-shirt is just plain crazy. (Can I afford it, well, yes, but I refuse to pay that for a tee!)

  7. As a customer, I don't like that they are carrying less inventory. However, it makes sense for the companies. I don't like paying full price, but I do find myself doing it for special items, not tees though. Thankfully, most of my full price items have sold out. Also, since I can no longer get free shipping and my teacher discount over the red phone, it makes more sense to buy what I love (full price love) and pay full price. For some items, I'm still waiting for good markdowns and if it doesn't stay around, then it wasn't meant to be. Also, I think some basics will still be ordered in large quantities, and therefore will last for a markdown.

  8. I know nothing about production, but I'm wondering if this move everything to China is now coming to bite the retailers. They have to order everything so far in advance and hedge. If there were still factories in the US, would there would be a shorter lag time in production? I'm thinking if a top sold out they could put more in US production with a quicker turn around. I realize we pay different wages for US workers than non-US, but I'm wondering if the tradeoffs are still making sense.

  9. The one thing I always hated as a kid was the mention of back to school sales at the end of July when summer had just begun! Please, let me enjoy my summer!!

    Anyway, I've def. noticed that many of the men's quality items have been disappearing before heading to the sale racks. I too have made some full-price purchases in the past weeks. I usually don't do that. Maybe its because I know that for a summer item, if I like it, I better buy it now, cuz come September in NJ, the summer items have seen their day.

    I did pay $32 for the Jaspe tee. Twice. I love it though. Man, that's an obscene amount of $$$ for 2 tees.

  10. I think they made a wise decision. It was sad (for me at least) last winter to see JCrew basically giving stuff away and then dumping on discount retailers. I know some people were personally happy because they got good deals, but from JC's perspective, it wasn't good for the wallet or the brand (which in turn, again, isn't good for the wallet.) JC stock holders should feel good about this response to market forces.

    Also, I think it was wise to limit even further the supply of less popular sizes (namely large sizes.) When I puruse JC racks (esp. the sales racks) they're full of larger items and completely devoid of smaller sizes.

  11. Maybe Jenna said that just to scare us into rushing into the stores and buying a bunch of stuff at FP. I'm not buyin' it! JC loves it when something sells out and an EBay frenzy follows (rose tee). Even though they are not directly profiting, it definitely adds to their appeal.

  12. Lower inventory is a good business decision at this time. Fashion is never ending. I agree with Genny. Next season will have loads of good stuff as usual at JC. It is going to be very hard for me to resist that place!


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