Easter Profits, Summer Danger

Last week U.S. department stores entered the No. 2 selling season of the year (Easter week) with the best prospects in ten years. Partly they could thank defense spending and the public's fear of higher prices. Partly they could thank their own recent merchandising aggressiveness, stimulated by the chains and mail-order houses to whom they had been losing ground. With March volume 10-15% ahead of 1940, and April even better, department stores may this year equal their 1930 levels, if not the 1929 peak.

Since department stores, like railroads, have a relatively inflexible overhead, their profits tend to rise faster than their sales. In the fiscal year ended Jan. 31, 1941, Gimbel Brothers upped earnings 67% on an 8% sales gain; Associated Dry Goods lifted profits 15% while sales rose 3%. Last week Marshall Field paid twice its usual dividend; Bloomingdale also increased its payment.

But there is another reason for this recent prosperity. Although department-store sales are 75% above their depression lows, inventories have risen less than one-third, and the gap between the two is the widest ever (see chart). Normally, low inventories are a sign of smart merchandising, meaning faster turnover, fresher and more attractive goods. In 1941, low inventories are also a danger signal. If storekeepers keep their shelves so bare in the face of a still soaring demand, they may soon awake to find themselves forced to buy in a priorities-ridden seller's market, bidding prices up. The fear that prices will soon be higher has recently gripped businessmen, Government men and consumers alike. Consumers have expressed their fear by stocking up while prices are low, buying almost everything in sight; department stores have not.

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