Profit could get squeezed even more as many retailers, including department stores, struggle to unload inventory and slash prices. Bobbi Rebell reports.
Piles of clothing could cause profit problems for U.S. retail chains. Stores are struggling to make up for a weak start to the year, and the inventory is getting stale, especially clothing, electronics and accessories. The next step: steep markdowns, which will be yet another blow to efforts to make a comeback. Among the worst hit: Macy's. Earlier this week shares dropped when the department store operator reported a drop in sales, cut its sales and profit guidance, and warned that inventories are building up. Adding to the pain: It talked about rivals also having the same problem. That means the competition to unload all that excess merchandise could be fierce. Max Wolff of Manhattan Venture Partners: SOUNDBITE: MAX WOLFF, CHIEF ECONOMIST, MANHATTAN VENTURE PARTNERS (ENGLISH) SAYING: The bigger issue for us is how does that react back on some of the brands that are particularly dependent on retail to sell. So there are some brands that really lean kind of heavy on mall traffic, and they are going to be hurt twice now. Once by a weak quarter looking back and the other by a lot of promotions competing with them. But some retailers may get a pass. The world's largest retailer, Wal-Mart, posted surprisingly strong sales on Thursday. Home Depot and Lowe's have been helped by the housing recovery. And off-price retailers, like TJX, which runs T.J. Maxx and Marshalls, have also been been able to benefit as more consumers look for bargains.