Retailers slash prices over yuletide fears

TORONTO—Canadian retailers are getting a dose of yuletide fear this fall as many of them slash prices early with anticipation that this holiday shopping season could be one of the most painful in recent memory.
Economists and analysts have a dismal outlook for the fourth quarter as the latest sales numbers and data suggests confidence is plummeting at an alarming rate.

“From our discussions with retailers across the country, it is safe to predict that [the] fourth quarter of 2008 will be the worst in over two decades,” said Perry Caicco, an analyst at CIBC World Markets in his outlook on the busiest shopping period of the year.
“For Canadian retailers and consumer companies, the everyday sales challenges are now enormous.”
It only takes a walk around any of the country’s major shopping malls to see storefronts plastered with signs proclaiming major markdowns on clothing items, electronics, and household decor—some of them as much as 70 percent off the regular retail price.
Sears Canada Inc. discounted most of its items as part of “budget relief” pricing themed on the troubled economy. Best Buy slashed prices on many of its big-ticket items for an “Anniversary Sale.”
Clothing retailers also were taking shears to their prices as they try to shuffle slow-selling fall items out the door. And industry watchers expect the aggressive pricing to continue.
“What retailers are trying to do is start the sales early . . . before risking a sharper slow down in spending later in the year,” said BMO Capital Markets economist Sal Guatieri.
Expectations of a weaker holiday season have been developing since the summer, but gained momentum this month as discouraging survey data from the Conference Board of Canada showed faith in the Canadian economy has crumbled to its lowest level in 26 years.
Even August sales numbers, from before the widespread market turmoil, showed weaker results. Sales were down 0.3 percent to $35.9 billion—marking the third such drop in the last four months.
None of this data gives retailers much optimism, especially since stock markets and consumer confidence aren’t exactly warming up to the winter months.
“I think we’ll see Canadian retailers take the ball and run a little more quickly and cut prices to get Canadians to open their wallets a little more freely,” said Guatieri.
But the question that remains is: “Is the situation all that different than last year?”
That’s when worries permeated through the industry as the loonie surpassed parity and increased the threat that Canadian shoppers would go stateside for a deal. Many retailers combated those fears by matching the U.S. price before the holiday season, though some of them did so reluctantly, saying it would eat into their profits.
Since then, the loonie has tumbled off of its record highs and closed Friday at 78.56 cents (U.S.), and all but quashed the likelihood of a massive rush of cross-border shopping.
For the short-term, analysts say prices are expected to remain low on most items partly because retailers paid for their holiday merchandise months ago.
But an online search showed many Canadian retailers already are reacting to the current position of the Canadian dollar for big-ticket items—and some of the deals aren’t particularly enticing for bargain hunters.
However, many smaller-ticket items are selling at a good deal.