News: Analysis & Commentary
ONE BIG BARGAIN BASEMENT
Stacey Parker had long been a die-hard devotee of off-price shopping, obsessively scouring Boston's Filene's Basement and Marshalls for bargains. This year, though, she discovered something new: "Department stores are often just as competitive," she says. And the gift wrap is nicer.
Off-price retailers grew quickly in the past decade by selling name-brand castoffs for less. Now, department stores are fighting back with lower prices of their own, and manufacturers' outlet stores are stealing away other consumers. The result: With the critical Christmas selling season under way, many off-price stores are reeling from the stiffest competition they've seen in years.
Same-store sales at some of the nation's big off-pricers, among them TJ Maxx Stores and Marshalls, were virtually flat in the first nine months of the year, while department-store sales gained a respectable 4%. In the fourth quarter, off-price sales likely will inch up just 1%, figures Goldman, Sachs & Co. "Everyone's gunning for the moderately priced apparel segment," says retail analyst Forrest Fontana at Putnam Investments. "And the department stores are winning."
SCALING BACK. The problem: After opening thousands of stores since the late 1970s, the off-price segment "may be reaching saturation levels," says Goldman Sachs analyst Richard N. Baum. Department stores, meanwhile, have consolidated dramatically, many emerging leaner and more efficient--and ready to compete on price. And sales at outlets--like the 85 stores at the huge new Worcester (Mass.) Common--will increase by about 19% this year, says Bear, Stearns & Co. analyst Dana Telcey. Although still a small part of the retail industry, outlets compete for value-conscious customers with many of the same products.
Off-pricers don't necessarily buy the doom-and-gloom. Bernard Cammarata, chairman of TJX Cos., the nation's largest off-price retailer, blames the "off year" on a poor fashion cycle. He predicts an industry comeback next year and is planning to build 40 to 45 new TJ Maxx stores a year in 1995 and 1996.
But Filene's Basement Corp. is scaling back growth plans, reducing to three the six new stores it planned to open next year after a 45% drop in third-quarter net profits. Filene's Basement and the others are losing customers like Nina Belasquez, a south Florida outlet shopper. "To get the best prices, you've got to go to specific places for specific things," she says. Her next destination: a department store.Geoffrey Smith in Boston, with bureau reports