Some stores are finding that deep discounts aren’t enough

August 18, 2010 at 12:00a.m.

Associated Press

NEW YORK

A dollar for a 40-ounce bottle of ketchup? Yawn. Four bucks for a 12-pack of Coke? No sale.

Even deep discounts on everyday items don’t seem to be enough to get Walmart shoppers to bite these days, and other chains are worried Americans won’t be in the mood to spend in the months ahead, which are critical for those companies.

On Tuesday, quarterly financial results from retailers including Home Depot and Abercrombie & Fitch showed that profits are rising because retailers are cutting costs and keeping their inventories lean.

But with the economy slowing once again and consumer confidence falling, they expect less out of the rest of the year, and they already have to push harder to get shoppers to buy.

Walmart hopes basics such as underwear and socks will bring in financially strapped shoppers. It’s also stocking smaller packages for the days leading up to when customers receive their government-assistance checks, and need to stretch their last few dollars.

Teen clothes store Abercrombie & Fitch, which slashed prices on some of its jeans by 40 percent to get people to buy for the back-to-school season, is expected to keep cutting prices through the fall.

At Home Depot Inc., sales are being driven by small repair projects, not big renovations, and weak spending has caused it to cut revenue forecasts for the year. It has added more signs in stores pitching deals such as $19 fiberglass six-panel doors.

At high-end Saks, where even wealthy customers are scrutinizing price tags, the store is pushing shoes and handbags as a way to update customers’ wardrobes without having to buy an entire outfit.

Even TJX Cos., which operates T.J. Maxx, Marshalls and HomeGoods and is stealing fashionistas from designer stores, isn’t sitting back. It is dramatically increasing its marketing spending to woo new shoppers.

With unemployment stuck at almost 10 percent and credit still tight, that’s going to be tough.

Wal-Mart Stores Inc.’s chief financial officer, Tom Schoewe, told journalists that its deep price cuts in May and June, including the cheap ketchup and soda, weren’t enough to bring people in the door and get them to buy other things.

The cuts targeted 22 foods and other essentials at an average savings of 30 percent. The original price for the big bottle of ketchup was $2.42.

“If low-income shoppers are passing that up, that goes to show you how tapped-out they are,” said Ken Perkins, president of research firm RetailMetrics.