For U.S. stores it is ugly out there: in more ways than one

CHATHAM, N.J./LOS ANGELES/WHITE PLAINS, New York Wed Nov 27, 2013 10:05am EST

1 of 3. A discounted price is seen at the Wal-Mart Supercenter in the Porter Ranch section of Los Angeles in this November 26, 2013, file photo.

Credit: Reuters/Kevork Djansezian/Files

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CHATHAM, N.J./LOS ANGELES/WHITE PLAINS, New York (Reuters) - The 2013 holiday shopping season may end up being remembered for its ugly sweaters and, for many retailers, even uglier discounts.

With growing online competition, weak consumer confidence and no fashion must-haves, most U.S. retailers will have to offer both big discounts and stellar service to get consumers to spend freely, according to 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, although that is more likely to help the luxury end of retailing.

Most industry forecasts show sales growing modestly overall, with online retailers taking a bigger slice of the pie and electronics stealing share from apparel.

ComScore, an analytics firm, this week said it expected e-commerce sales, including those made on mobile devices, to rise 16 percent this holiday season.


In a sign of intense competition, there has been unprecedented price-cutting from giant discount chain Wal-Mart Stores Inc, earlier-than-usual deals from online goliath 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," 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. "That's the hip thing now; bad sweaters are so cool" among 20- and 30-year olds.

New must-have gadgets such as Sony Corp's PlayStation 4, 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 RBC Capital Markets 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, he 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. The retailer'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" and interchangeable this year, and their customers have been trained to wait for the best deals.


Craig Johnson, president of consulting firm Customer Growth Partners, praised Nordstrom Inc's selection of jeans and shoes, but said he expected the department store chain to have just an "OK" season 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 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 has not 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 she 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 department store chain J.C. Penney Co Inc, analysts had mixed views about overstuffed racks of clothing. Some saw them as a sign of weakness, but others said the company was trying to prove to shoppers that it had overcome recent troubles that 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)

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Comments (24)
mb56 wrote:
It’s pretty obvious – the Republican government shutdown and the looming threat of them doing the same thing early next year have killed this year’s holiday sales. Who wants to spend while these guys continually threaten to take our economy hostage?

Nov 27, 2013 2:10am EST  --  Report as abuse
Justitia wrote:
Its the massive transfer of wealth, money has been trickling up for
15 years. The answer is simple, if income is monopolized, spending
must be monopolized. The super rich can solve this imbalance by
replacement purchasing. If you have all the middle income, do all
the middle spending, That’s a lot of presents, they’ll need to use
Giant Redwoods as christmas trees.

Nov 27, 2013 3:39am EST  --  Report as abuse
morbas wrote:
The debt has one cause, the aristocratic view of superiority and exemption to responsibility, aye even subjugation of Christianity itself. They would rather mint Caesar’s denarii and subjugate humanity to a slaves wage. The top quintile income wealth is over 60% of the national income summation. And yet we tax poverty levels to hoard even that last 1% of coin. And tax least at the highest income levels.
The House of Representatives has the authority of taxation and can look no where else to shed it’s purpose. “…that I take this obligation freely, without any mental reservation or purpose of evasion;…”.
Have a happy day :-).

To: Office of Senator ____________________
United States Senate Washington,
D.C. 20510
To: Office of Representative_________________________
U.S. House of Representatives
Washington, DC 20515
We the people of this United States do proclaim this federal government ‘of, by and for the people’. That, in order to fairly distribute revenue burden, to satisfy ‘net income’ progressive taxation, to balance all governments budgets, and to not tax poverty;
The people mandate:
Income National Tax code that shall use margin graduated income tax principle: Margin $30k 0% single, $60K 0% joint, income above this a linear increasing rate {Income-[$30k or $60k])*(Income/$800k)*90%; 90% limit} . Exemptions shall be prohibited. The Federal Reserve shall amend the (90%) rate, and control currency printing mandated to maintaining currency availability and value. The Federal Reserve shall set the Margin rate value well (>2x) above highest of all State Poverty Level(s). Revenue shall be proportioned 1/3rd Federal,1/3rd State proportioned per cast ballot and 1/3rd Local proportioned per cast ballot.
This National Tax is a peoples tax, no other citizen taxation shall be permitted. Business shall not be taxed. The Federal Reserve shall control taxation. The people will by simple majority approve or reject all margin and rate changes at every Congressional House Representative election year ballot.

Use Linear Interpolation between points.
$60k-yr 0%
$100k-yr 4.5%
$200k-yr 15.75%
$300k-yr 27%
$500k-yr 50%

Nov 27, 2013 6:39am EST  --  Report as abuse
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