Retailers frequently face challenges in demand forecasting which can lead to excess inventory. This is often addressed through clearance sales where the inventory is sold at a markdown price. In these situations, the presence of competition can largely alter the optimal strategy for a retailer. This study proposes a two-period model that determines the optimal initial order quantity for a retailer in the presence of competition. Our model highlights how competition dynamics affect revenue, demonstrating significant gain over the traditional Newsvendor model in limited clearance scenarios. Furthermore, we extend the model to study the impact of risk aversion on these decisions.