Toy, luxury stores eye Christmas 2009 with caution

[March 30, 2009]  NEW YORK (AP) -- Shoppers may be thinking about spring, but some retailers are reluctantly setting their sights on Christmas.

Still suffering whiplash from the worst holiday selling season in at least four decades, major toy sellers and upscale merchants -- who must order Christmas stock earlier than most retailers -- are exercising extreme caution as they plan for the rest of the year.

They're ordering at lower prices, they're keeping orders small and they're planning to buy more only if consumer demand picks up, said David Wolfe, creative director of The Doneger Group, which consults with stores on apparel buying.

For shoppers, this hesitance will translate into fewer choices and, if demand increases at all, fewer bargains. For factories abroad, it's feeding desperation at the time of year when manufacturers usually start ramping up to fill summer and Christmas orders.

But retailers are more worried they'll be stuck with unsold merchandise they'll have to discount than that their shelves will go bare.

"We would rather chase than not and, if we cannot get it, we would rather not get it than have too much inventory," J. Crew Group Chairman and CEO Millard Drexler told investors during a recent conference call. "Because none of us really have figured out where this thing is going, where is the bottom, where is it settling in at."

Saks Inc. Chairman and CEO Steve Sadove recently reminded investors that full-price selling is "largely a result of supply and demand."

Shoppers are more likely to buy on sight if stores have something they want and know will be in limited distribution, lest the item sell out while they wait for the price to fall, explained retail consultant Walter Loeb. So Saks is cutting inventory 20 percent this year. And both Saks and rival Neiman Marcus have pressed top designer suppliers to lower their prices.

Clothing and other specialty retailers must get their Christmas orders right because they do as much as 40 percent of their business at the end of each year, said Ken Perkins, president of research company RetailMetrics LLC. For the toy industry, at least half of all revenue and profit come during the winter holiday shopping season.

So expect fewer $200 robotic pets on toy store shelves in the fall. And at luxury stores look for a higher proportion of classics and specialty items like fur-trimmed gloves and jackets -- nothing too trendy that could soon look passe. Jewelry stores also plan to highlight classic styles and keepsakes.

Factories abroad "are on edge," said Josh Green, chief executive of Panjiva, which tracks U.S. Customs data on shipments by global suppliers to the United States. One in four major Chinese manufacturers shipped less than half as much to U.S. customers in November through January than they did a year earlier, he said.

Shrunken, delayed and staggered orders are also making planning hard for folks like Harold Chizick, vice president of marketing for toy maker Mega Brands. He said buyers are not making their typical full-year commitments to order products other than its much anticipated Battle Strikers -- electronically charged tops that retail for $15.

The silver lining may be greater flexibility for retailers like Denis Hofstetter, owner of The Toy Store in Atlanta. Small stores like his usually put their orders in later than their bigger competitors since they order smaller quantities.

Ordering summer toys now, he said, he can buy 150 kites instead of the 300 his supplier might have required in years past. He expects to order more as summer approaches, but he also plans to follow this cautious strategy again when he starts placing Christmas orders in June.

"Business is so erratic," said Hofstetter. "Customers are being very careful. They're holding on to their money."

[Associated Press; By ANNE D'INNOCENZIO]

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