NEW YORK — Retailers are accelerating their use of survival tactics — slashing prices further and pulling merchandise off shelves to send to liquidators — as the number of holiday shopping days dwindles. But January and beyond look scarier for even relatively healthy merchants as the passing of the holidays gives shoppers no reason at all to spend.
What's worse, the industry expects a rise in returns after the holidays as shoppers seek to convert their unwanted gifts to much-needed cash as they struggle with rising layoffs, tightening credit and shrinking retirement funds.
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Many retailers are in panic mode as they try to liquidate inventory in a season that's expected to show the first drop in sales in nearly 40 years. For this last weekend before Christmas, Sears stores are offering up to 70 percent off on fine jewelry and up to 60 percent off on outerwear, while Macy's is dangling early morning discounts of up to 75 percent. JCPenney is featuring 300 early morning specials on items from pajamas to handbags.
But a major winter storm cutting across the country could make shoppers just stay home.
"The retailers are doing everything possible to be lean and clean by the end of Christmas, because the shoppers are not going to be there" in January, said New York-based retail consultant Walter Loeb. "This is more about survival."
But the casualties from the holidays are rising. Circuit City Stores Inc. and KB Toys Inc. have filed for Chapter 11 bankruptcy protection in recent weeks. Finlay Fine Jewelry Corp., which operates stores such as Bailey Banks & Biddle, warned Wednesday that it may not have enough cash to finance its operations through the end of its fiscal year on Jan. 31, and may have to "significantly curtail" its business or pursue other options.
In a sign of how grim the future looks for consumer spending, even fairly healthy companies are making big shifts in their plans in response to the deteriorating climate. Best Buy Co. Inc. announced Tuesday that it will slash capital expenditures by half in 2009 and will offer voluntary severance packages to virtually all its 4,000 corporate employees. The nation's largest consumer electronics chain also said its third-quarter profits skidded 77 percent.
"We believe that the environment for consumer spending is likely to get worse before it gets better," said Brad Anderson, chief executive of Best Buy — which has seen little benefit so far from the bankruptcy of Circuit City, its largest rival, which is closing more than 150 of its approximately 700 U.S. stores by Dec. 31.