STORES Magazine - November 2008 - (Page 26)

EXECUTIVE SUITE / COVER STORY BY SUSAN REDA, EXECUTIVE EDITOR alloween arrived on September 15 in the form of a national financial crisis, and it’s been one hair-raising moment after the next for American consumers and the retail industry. Grisly reports from Wall Street and the chilling response retailers have received from banks have made the third quarter a nailbiter, and experts are predicting the macabre atmosphere could hang over the industry long after Santa has parked his sleigh. In fact, it could linger until the middle of next summer. H Unrelenting media coverage of the financial crisis leaves little doubt that our nation is in the middle of a full-blown economic nightmare. Buffeted by the $700 billion bailout of the financial industry, a frightening rollercoaster ride on Wall Street, the credit market freeze and the crumbling of once-venerable institutions like Lehman Bros., Fannie Mae, Freddie Mac, Washington Mutual, Wachovia and AIG, businesses are reeling. For retailers, whose fortunes are so closely meshed with consumer confidence and consumer spending, the goal right now is to tread water. They’re hoping to find ways to salvage the allimportant holiday season. Still, with the credit markets effectively frozen and prospects for borrowing looking bleak, the first two quarters of 2009 are expected to be especially tough. “As retailers continue to report poor sales, it’s scaring the factors [providers of financing to vendors] out of their wits,” says Walter Loeb, president of Loeb Associates. “There’s no question that that ability to borrow will be difficult for the rest of the year, but if retailers planned their inventories right they shouldn’t need to borrow much through the balance of the fourth quarter.” Loeb is more concerned about spring and summer. “Some retailers will depend on factors and some may be able to borrow on credit – albeit at higher rates. But there won’t be sufficient 26 STORES / NOVEMBER 2008 cash available for everyone. I expect the credit agencies to be very aggressive in reviewing a retailer’s performance before granting loans. Any question of creditworthiness or weak ratings will result in credit being denied.” Rough road ahead etailers are bracing themselves for a rocky stretch. Already, many have announced plans to slow or suspend new store openings; remodels also are likely to be put on hold. Some executives say they’ll cut back on inventories, and nearly all are scrutinizing their operations in an effort to trim unnecessary costs. While no one could have predicted the severity of the current crisis, retailers have been operating with tighter inventories for the better part of 2008. Most trace the early signs of a slowdown in consumer spending back to last fall, but it was when gasoline prices started to soar in the spring that shoppers began parking their disposable income. While the cost of filling their gas tanks has come down recently, consumers — feeling the pressure of declining home values, shrinking investment port- R WWW.STORES.ORG http://WWW.STORES.ORG

Table of Contents Feed for the Digital Edition of STORES Magazine - November 2008

STORES Magazine - November 2008 Contents Executive Editor's Page President's Page Every Cup Counts What Shoppers Think Less Park Time, More Shop Time 10 Things You May Have Missed Numbers Worth Counting Full Price/Markdown Retail People Retail Held Captive First Look Concept2Watch Marketing Technology Custom Software PCI Compliance Data Security Arts Update Newsbeat LP Issues: Q&A Cover Story Surveillance Systems Online Fraud Industry Perspective LOEB Retail Letter Point of View NRF News Retail Crossword Retail Industry Calendar Last Laugh

STORES Magazine - November 2008

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