Budget Retailers Starting to Feel the Economic Pinch
Yikes. Apparently even recessionista-friendly chains are starting to take a hit. According to Bloomberg.com:
Hennes & Mauritz AB, Europe’s second-largest clothing retailer, reported its first quarterly profit drop in more than five years as the strengthening dollar cut into margins and the economic contraction deterred shoppers.
The shares fell the most since December after H&M said first-quarter net income slid 12 percent to 2.58 billion kronor ($320 million), missing the 2.98 billion-kronor median estimate of nine analysts. Sales at stores open at least a year declined 8 percent in February, the seventh straight drop, H&M also said.
You can read the full article here.
I’ve definitely stopped my nightly habit of popping into H&M to see what’s new on the racks. Suddenly purchasing a trendy, $20 shirt I will likely wear only two or three times seems as frivolous and unnecessary as more lux purchases.
Have you all cut back your shopping?
I’ve cut back, but of course in response, retailers are rolling out their biggest sales in years. There’s never been a better time to shop. Even the newest merchandise (i.e. new spring 2009 collections) hitting the stores is starting off at discounts; retailers aren’t even trying to push full prices. I’ve lost track of how many sale notices I get in my inbox these days.
The unprecedented discounting from last fall/winter (70% off at Saks? Do we all remember that?) infuriated plenty of designers and manufacturers, but it also confirmed a longstanding suspicion on the part of shoppers that they’ve been getting ripped off for years (or at least, paying very healthy markups with nary a complaint). Now that the economy is crippling and outright splurging seems tacky, consumers are less likely than ever to pay full price on clothes, accessories, and the like. However, retailers and designers still need to stay in business and the shipments of new products now entering stores are from orders placed 12+ months ago, before the retail bloodbath. So we have a classic case of oversupply and underdemand, and the prime beneficiaries are people who still have a little bit of money to spend; what with all the sales and bargaining opportunities out there, your dollar has never gone further. Customer service has improved, too!
Anyway, what we’re looking at is a huge game of chicken. Consumers are nervous about spending money, but retailers are more frightened by the prospect of all that unsold inventory. So far, the stores have blinked. Personally I like it that way … although I do of course empathize with all those retail and manufacturing employees who may be joining the ever-growing pool of unemployed.