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Monday, May 23, 2022

RETAIL—The Retail Headache



L.A. Stores Struggle to Survive Amid Downturn

Eddie Bauer recently closed its clothing store in the Beverly Center. A few doors down, Natural Wonders, which sells nature and science-oriented gifts and knickknacks, is having a going-out-of-business sale.

And behind a cash register at a local Banana Republic store, a sales clerk looks at the long line of customers waiting to pay and complains that management has cut back employees’ hours so much that there aren’t enough people to handle the crowd.

Retailers throughout Los Angeles, with sales volumes sliding steadily, are scrambling to reduce expenses or surrendering to liquidation.

Ubiquitous chains like The Gap Inc., faced with a glut of merchandise, have been closing under-performing stores across the country and concentrating on more lucrative stores and markets to bolster their bottom line. The strategy doesn’t seem to be yielding the desired results at The Gap yet its same-store sales dropped 8 percent in March.

In a slowing economy, retailers are among the first to face Darwin’s conclusion: Only the strongest will survive.

And while the identities of the strongest have yet to emerge, the weakest retailers are becoming clear, as they file into bankruptcy court. Last week, Track ‘n Trails, a 22-year-old retailer that sells outdoor shoes and boots, filed for Chapter 11 reorganization in U.S. Bankruptcy Court.

Natural Wonders, based in Fremont, Calif., is liquidating the assets at its 237 stores across the country, after months of excruciating financial pain.

“Christmas was just brutal,” said Peter G. Hanelt, the company’s chief executive. “Being a gift store, 50 percent of our business comes in during the holiday season. Then you had the largest decline in consumer confidence in years, the stock market decline, rising energy prices, gas prices going up and major snowstorms across the country,” Hanelt lamented. “We really felt the impact because our merchandise is not absolutely necessary to buy.”

Other chains were experiencing similar problems. Eddie Bauer, a division of Spiegel Inc., saw its same-store sales drop 11 percent during March. Faced with increased competition from other casual attire stores, it began closing under-performing stores this year.

“You have some stores that are closing down and others that are expanding rapidly, depending on the category of the store,” said Malachy Kavanagh, a spokesman for the International Council of Shopping Centers.

“Straight apparel companies are having a tougher time than discounters or mass merchandisers,” Kavanagh said.

Department stores have been particularly aggressive in drawing in customers with heavy discounts. “Robinsons-May and Macy’s have been having sales every week,” noted Howard Wong, vice president of retail at Jones Lang LaSalle, a Los Angeles real estate firm.

Specialty stores also are slashing prices heavily on their spring goods. For example, Ann Taylor already has spring wear marked down as much as 50 percent. “The spring season didn’t really happen. The West wasn’t that warm, and the East Coast was cold,” said Aubie Goldenberg, a retail expert at Ernst & Young in Los Angeles. “What I am seeing is that many of the retailers have too much inventory. They are being very promotional. Already they are marking down shorts.”

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