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Friday, July 9, 2010

Italian Retailers Brace for Summer Sales Flop as Shoppers Spurn Discounts


Michele Nicolaci, a salesman at Fendi SpA in Forte dei Marmi, a trendy seaside town in Tuscany, says his store’s clothing usually sells itself. Not this summer.

“I’ll have a hard time meeting my sales targets,” Nicolaci said. “This looks like a hard summer, everything from the weather to people generally being kind of down.”

The summer sales season, one of two times each year when retailers like Benetton SpA and Prada SpA mark down prices, normally accounts for about 12 percent of annual Italian revenue for the clothing and shoe industries. This year’s sales period coincides with unemployment at an 8-year high, consumer confidence slipping to a 16-month low in June and hotter-than- average temperatures in city centers from Milan to Rome.

Revenue from summer sales will fall 5 percent this year to 4.2 billion euros ($5.3 billion), or 117 euros per shopper, according to estimates from Confcommercio, the country’s retail trade group. The World Cup flop by Italy’s soccer team will also cost the economy about 140 million euros, according to a Chamber of Commerce report on June 25.

Italy’s blue-shirted “Azzurri” had their worst World Cup performance in more than three decades, failing to win all three of their matches after taking the title in 2006.

Soccer ‘Fiasco’

“No one wants an all-blue jersey after Italy’s fiasco,” said Andrea, 28, a sales assistant at Adidas AG’s store on Via del Corso in Rome. He declined to give his full name, citing company policy. “We had to change our displays overnight.”

Letizia Moscardino, a 27-year-old paralegal in Rome, said she couldn’t pass up a 40 percent discount on dresses at the Max & Co. store on the city’s Via Condotti. Even with the 300-euro expense, she’s spending less than in past summers.

“In other years, I might have gone for fancier labels,” she said. “My summer shopping budget is lower this year.”

The heat is playing a part too, said Alberto Visentini, 51, owner of a Milan sporting goods store, noting that temperatures reached 35 degrees (95 degrees Fahrenheit) on July 2, the first day of the sales season in Rome and Milan.

“People don’t want to go out shopping when it’s so hot,” he said.

Household purchasing power fell for a sixth quarter in the three months through March, according to a report today by the national statistics office, Istat.

‘A Farce’

“That decline is a result of the economic crisis,” Mariano Bella, chief economist at Confcommercio, said in a July 1 interview.

To combat the spending slump, retailers are seeking creative ways to skirt regulations and offer discounts outside of the permitted sales periods. Adiconsum, one of the country’s biggest consumer groups, says buyers often get ripped off during official sales seasons by retailers who overstate discounts or flog old merchandise and claim that it’s new.

“It’s anachronistic to continue talking of regulated sales when it’s obvious to everyone how, with various promotions and discounts and liquidations, the whole thing has become a farce,” Adiconsum national secretary Pietro Giordano said in a June 28 statement.