Feature
Consumer Spending Recession Won’t Stop Retail Growth Plans
Sabah Karimi
With the consumer market in a flux and spending recession in tow, it’s easy to understand why retailers across the luxury, discount, and online segments are scrambling for sales. The 2007 holiday season rung in only modest sales for retailers across all divisions, and this past January has shown very few signs of an upswing.
Poor performing brands and plummeting retail sales are keeping retailers on the lookout for ways to boost consumer interest and buy, buy, buy – not say goodbye to their usual spending habits.
The New York Times reports that sales fell dramatically in December for both big box retailers and department stores. From the luxury goods at Saks Fifth Avenue to the trendy brands at Nordstrom, there was no sign of shopping sprees this holiday season - consumers waited to make purchases during the post-season markdowns and clearance sales instead. (Source:
Jan 11 ’08). The housing slump was just the start of the snowball effect late last year, and the effects trickled into the retail industry with a severe drop in consumer spending.
Still, companies including Coach report aggressive sales and growth this past quarter, with sales ‘well ahead of expectations’ according to Lew Frankfort, Chairman and CEO of Coach, Inc. The Earnings Call transcript for F2Q08 reflects this luxury retailer’s strong position for the spring season ahead, and Coach is continuing expansion efforts in both online and offline projects.
Kohl’s Corp. recently signed an agreement to license the Dana Buchman brand and grow its luxury lifestyle division. The brand is
designed by Liz Claiborne, Inc. and will offer yet another price point for women who want more options to purchase affordable designer clothing. Kohl’s has already begun stimulating sales with its Vera Wang collections, and now Dana Buchman will offer more options in shoes, intimate apparel, accessories, and even beauty and fragrance. The brand is scheduled to launch in early 2009;
the move is just one example of retailers that won’t let an oncoming recession make an impact on their growth strategy.
Charlotte Russe, the retailer of young women’s and misses apparel, also reported an increase in sales through the end of December 2007. The company expects further increases for January and February with a slight increase in earnings per share for 2008. The 440 stores across the country continue to offer value-prices for the growing teen, young women, and misses segments, and consumers worldwide can enjoy the brand online. Charlotte Russe is standing strong amongst other mall-based competitors such as New York & Co. that reports sluggish sales this period.
In spite of the fluctuating consumer economy, consumers may experience more opportunities to build up spending power. With the Federal Reserve’s interest rate cuts this past month, and the Bush administration’s plans to send out tax rebates to consumers in 2008, consumers just may flex their newfound buying power.
The Associated Press reports that President Bush and Congress are working on a rebate that equates to $300 - $600 or more in consumers’ pockets by tax season:
“United for urgent action, the White House and Congress raced toward emergency steps to …rescue the national economy from a possible recession, including tax rebates of at least $300 a person — and maybe as much as $800.”
As apparel retailers and designers make furious attempts for recovery from the poor performing holiday quarter, many may soon see an increase in sales, albeit a modest one, after taxes are filed and claimed this year. The cuts are one attempt to stimulate sales and encourage consumers to simply spend more, and retailers in all divisions just may be looking forward to more favorable sales ahead.
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