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On Retail | Mark Albright

Retailers brace for another tough year

NEW YORK — The evidence is piling up.

Retailers don't see an economic recovery kicking in until 2010, so they are digging in for tough times. They've cut back inventory so much that traffic of Asian imports into U.S. ports dropped 7 percent to its lowest point in five years, according to Port Tracker.

Stein Mart added 178 people to the 67,000 full-time retail jobs wiped out since Thanksgiving when it announced last week that two-thirds of its stores don't need a second assistant manager.

Even the fashion industry has a dour outlook.

"You're going to see a lot more black clothes in fashion because everybody on Seventh Avenue thinks shoppers will be bummed out until 2010," said David Wolfe, creative director at the Doneger Group, which tracks fashion trends for many chains.

After their worst holiday season in decades, the annual hand-wringing common among 18,000 executives gathered in New York City for the annual National Retail Federation convention this week has taken on a sense of relief that they survived Christmas. Now they're scrambling for new ways to prosper in the more frugal post-recovery world.

"It's tough out there," said Arnold Zetcher, former chief executive of Talbots and Bonwit Teller. "And nobody has been through anything like this, not even the 1992 recession."

Lee Scott, chief executive of Wal-Mart Stores Inc., said no forecast is as grim as the Great Depression, when 14 percent of all stores went out of business. "But I have no sense for when this economy will turn around," he said.

With more bankruptcies and store closings to come and tightening credit for retailers and credit card holders, stores have new tactics:

• Fashion trends are shifting from bling and conspicuous consumption. Premium denim will give away to just denim. Flashy jewelry will fade to simple stone cuts, gold, silver and pearls. By 2010, the fashion industry hopes shoppers will emerge from their funk to spring for brighter pastels and a push for another hot color, a jewel-tone green.

• Rising retail vacancies and shrinking rents mean many are weighing closing profitable and unprofitable stores. That's because rivals are vacating good spots that they can move into. By reconsidering all stores in a market, chains can get lower rents.

• Tight credit made it tougher for struggling retailers to get financing to survive in Chapter 11 bankruptcy, so more go directly to Chapter 7 liquidation. That means more price competition from more going-out-of-business sales.

• The Federal Reserve is pumping trillions in new money into the economy to head off deflation and stimulate the economy. Eventually, economists say, all that money will create inflationary pressure on prices. In the meantime, stores can sell goods for a lot more than they pay for them as consumers become more willing to buy before inflation eats away at the spending power of their dollars.

"We are entering a time when the economy is more reliant on government spending," said Carl Steditmann, chief economist for Deloitte Research.

Mark Albright can be reached at albright@sptimes.com or (727) 893-8252.

Retailers brace for another tough year 01/12/09 [Last modified: Tuesday, January 13, 2009 7:23am]
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