Forecast: Retail

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Retailers show signs of spending more aggressively on advertising as they head into their most critical seasons of the year: back to school and holiday.

"It seems like most [retailers] are keeping ad spending at the same percentage of sales, and since total sales are up, spending is up," said Richard Baum, a retail analyst at Credit Suisse First Boston, New York.

Among those planning to up marketing investments are troubled Gap, which may increase ad spending by 10% to 15%, with Old Navy getting the biggest share of the increase, Old Navy President Jenny Ming told a recent investor meeting.

Howard Davidowitz, chairman of retail consultant Davidowitz & Associates, said "cost control is a major dimension of the business and advertising is a variable cost and it's being challenged." But retailers like Gap and Kmart Corp. are increasing spending, he said, because "they are ... in a free fall and both are looking to reinvent themselves."

Others see retailers' spending for the remainder of the year remaining flat to a few percentage points below 2001 levels as they try to get more bang for their advertising buck. Warren Kornblum, chief marketing officer for Toys `R' Us, said his advertising spending will hold steady with last year's outlay, but he expects the campaign to "feel" bigger because its new campaign will go national. It's now running only in the top 20 markets.

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