Analysts expect more discounts as Christmas nears

[December 15, 2008]  MILWAUKEE (AP) -- The clock is winding down on what could be one of the worst holiday shopping seasons in decades and recession-hit shoppers are finally starting to feel some pressure to spend.

But toy stores, electronic outlets and clothing boutiques are also under pressure to get shoppers to loosen their purse strings by offering steep discounts, analysts and retailers say.

There is now just one full shopping weekend left before Christmas in a holiday season marked by recession and consumers worried about their slumping investments, dire economic news and fragile job security.

Traffic rose at stores this past weekend. Analysts said, however, that consumers still were making fewer purchases than last year. Prices were slashed 50, 60 even 70 percent in an effort to turn reluctant window-browsers into buyers.

"The holiday is going to come whether the economy is up or down," said Marshal Cohen, chief industry analyst at market research group NPD Group. "The customers are going to shop. They may be buying less; they may be spending less."

Traffic levels at stores were comparable to last year, he said, though people were looking for deals but not as willing to spend their money as last year. Discounts were way up and they're going to get bigger as companies try to get rid of their inventory.

The discounts were working on shoppers like Ernestina Martinez, who was at Macy's in Manhattan on Sunday. The mother of two daughters, ages 23 and 8, Martinez has cut her holiday spending in half this year, from $1,200 to $600. She's looking to purchase only discounted items like clothing and toys.

"I'm buying whatever is on sale," said Martinez, of Bayville, N.Y., who is a Medicaid specialist.

Shoppers were coming out in strong numbers at malls owned by Macerich Co. over the weekend, said Susan Valentine, senior vice president of consumer experience. She said people were even waiting for parking spots at the company's properties, including The Oaks mall in Thousand Oaks, Calif. They're realizing they don't have much time left before Christmas and they want to see the deals that are out there.

"I really think it's starting to hit people that there's only one more weekend," she said.

Cars were backed up a mile on Interstate 65 in Franklin, Tenn., over the weekend as shoppers crammed to leave the highway and get into Cool Springs Galleria, which has five department stores.

Results were mixed across the country, with electronics still doing well and stores like warehouse-club operator Costco Wholesale Corp. were mobbed, Cohen said.

"It wasn't as good as last year but it wasn't as doom and gloom as everyone was expecting," he said.

This Saturday was the strongest yet this season, said Karen MacDonald, a spokeswoman at mall operator Taubman Centers Inc. Traffic was up at stores throughout the country, but in terms of sales, business overall ranged from slightly above, to flat, to slightly below last year's levels, she said. Apparel was a top seller, while sales of high-end jewelry and home furnishings were weak.

Figures released late Sunday by SpendingPulse pointed to more signs that shoppers are continuing their frugal ways, despite a decent spending surge on Black Friday. SpendingPulse is a data service provided by MasterCard Advisors that estimates U.S. retail sales across all payment forms including cash and checks.

From Nov. 28, the day after Thanksgiving known as "Black Friday," through Dec. 6, luxury sales dropped 34.5 percent compared to the same period last year, while overall apparel sales fell 22.9 percent. Electronic sales fell 22.3 percent.

Online sales last week fell 1 percent to $3.81 billion from the same week last year, according to research company comScore Inc., which called the drop "marginal."

From Cyber Monday on Dec. 1, which marked the kickoff to the online holiday shopping season, through Friday, sales were up 3 percent to $8.26 billion from last year, the firm said Sunday. Tuesday marked the heaviest online spending day on record with $887 million in sales, comScore said, adding that it expects online retailers to continue offering discounts on products and expedited shipping to spur sales. It noted apparel and accessories sales were up 21 percent in the first 12 days of December, while books and magazine sales rose 18 percent.

Same-store sales are expected to be down as much as 1 percent in November and December, according to Michael P. Niemira, chief economist at the International Council of Shopping Centers.

If that holds true, it would mark the weakest season since at least 1969 when the index of same-store sales began being calculated. Same-store sales are sales at stores opened at least a year and are considered a key indicator of a retailer's health.

Slumping sales are weighing on retailers. Last week they forced retailer KB Toys to file for bankruptcy protection for the second time in four years. The 86-year-old company plans to begin going-out-of business sales at its stores immediately.

With spending expected down, stores have been stepping up their discounts to try to capture whatever money consumers decide to part with.

Toys R Us Chief Executive Jerry Storch said the retailer expects business to pick up since people put off their shopping this year, not just because of the economy but because Christmas falls on a Thursday. They're also waiting for deals, he said, and the company is boosting its discounts. Ads this weekend announced "Savings of a Lifetime" he said, such as electric race car sets for $24.99, half off the original price.

"I do believe customers have been taught to wait and this is it," he said. "The waiting is over. There are only 10 days until Christmas."

But even with the discounts, not all shoppers want to spend their money. Melody Easton, from New York City, was just laid off from her job before Thanksgiving. The 29-year-old was out looking at photo frames and mugs at Crate & Barrel in Manhattan, but trying to keep her spending on gifts -- for a shorter list of people this year -- within reason.

"Usually I go all out, but I'm spending less this year," she said. "I usually have a long list, but not this year."

[Associated Press]

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.