Breaking News Bar
posted: 11/24/2013 6:56 AM

Walmart touts $98 TV as holiday seen weakest since 2009

hello
Success - Article sent! close
  • More than a dozen retailers are opening earlier, or for the first time, on Thanksgiving Day. Among the attention- grabbing stunts: a $1 million jackpot for one of the first shoppers to visit Gap Inc.'s Old Navy chain on Black Friday.

      More than a dozen retailers are opening earlier, or for the first time, on Thanksgiving Day. Among the attention- grabbing stunts: a $1 million jackpot for one of the first shoppers to visit Gap Inc.'s Old Navy chain on Black Friday.
    Associated Press

 

Bloomberg News

U.S. retailers are discounting earlier than ever as they brace for the weakest holiday shopping season since 2009.

Order Reprint Print Article
 
Interested in reusing this article?
Custom reprints are a powerful and strategic way to share your article with customers, employees and prospects.
The YGS Group provides digital and printed reprint services for Daily Herald. Complete the form to the right and a reprint consultant will contact you to discuss how you can reuse this article.
Need more information about reprints? Visit our Reprints Section for more details.

Contact information ( * required )

Success - request sent close

Wal-Mart Stores is dangling a 32-inch flat-screen TV for $98, down from $148 last year. Sears has waived layaway fees and its Kmart chain is introducing a rent- to-own program. More than a dozen retailers are opening earlier, or for the first time, on Thanksgiving Day. Among the attention- grabbing stunts: a $1 million jackpot for one of the first shoppers to visit Gap Inc.'s Old Navy chain on Black Friday.

Faced with wary shoppers and a shorter holiday season, retailers are piling on deals as they jockey for market share during the most important sales period of the year. For the fourth year in a row, disposable incomes in 2013 have only inched up. As result, low-income Americans will again have a less-merry season than affluent consumers, who are more flush thanks in part to a 26 percent rise in the Standard & Poor's 500 index this year.

"We will be seeing promotions significantly above the current 30 percent off, which are the opening table stakes," said Craig Johnson, president of Customer Growth Partners, a New Canaan, Conn.-based consulting firm. Stores have too much inventory, which "doesn't bode well for 2014."

The disparity between wealthy and lower-income shoppers is already showing up in chains' fourth-quarter profit estimates, with Tiffany & Co. projected to fare better than Wal-Mart and Kohl's Corp.

U.S. retail sales excluding autos and gasoline grew 0.2 percent in October, half the month-earlier gain, according to the median forecast of economists surveyed by Bloomberg. The Commerce Department will release those figures Wednesday.

With shoppers expected to visit fewer stores this holiday, sales are projected to advance 2.4 percent, the smallest increase since the year the recession ended, according to ShopperTrak, a Chicago-based researcher. Sales from Black Friday through Cyber Monday are projected to rise 2.2 percent year- over-year, researcher IBISWorld said Tuesday.

The deep discounts will crimp retailers' bottom line. Macy's Inc., which has added doorbusters and deals of the day, warned that profitability will come under pressure in the fourth quarter. Analysts on average estimate that Macy's gross margin, or earnings left after subtracting the cost of goods, will shrink to 40.3 percent this holiday quarter, having eroded each year since 2010, the last year it widened.

This year will be the worst and most promotional shopping season for specialty apparel and department-store chains since 2008, Morgan Stanley retail analysts predicted in an Oct. 31 report, blaming low consumer confidence.

Last month, consumer sentiment slipped to a nine-month low, colored in part by the U.S. government shutdown and debt-ceiling debate. Higher payroll taxes and uneven job growth also have undermined confidence. Shoppers have been spending less on such discretionary purchases as clothes this year as they switched to autos and home-related merchandise instead.

"The consumer is more deal-driven than ever," Ken Perkins, president of researcher Retail Metrics LLC, wrote in a Nov. 14 note. "Discretionary dollars for holiday spending are limited for the large pool of lower- and moderate-income consumers due to lack of wage gains this year coupled with the increased payroll tax."

J.C. Penney Co., struggling to turn itself around after a failed attempt to move upmarket, will offer extremely deep discounts early in the season, which will put pressure on other retailers to do the same, the Morgan Stanley analysts said. The six-fewer shopping days this year also could make the chains "push the promotional 'panic button' earlier than needed, putting their margins at risk," they said.

Wal-Mart, which has projected stagnant U.S. comparable sales for the rest of the year and vowed to be aggressive with its promotions, fired its first salvo Nov. 1 with its earliest- ever holiday deals.

"Retailers starting their holiday sales Nov. 1 is a big switch," Candace Corlett, president of New York consulting firm WSL Strategic Retail, said in a Nov. 12 phone interview. "Whichever retailers get those dollars first will win."

Black Friday has been creeping into Thanksgiving since the downturn. Now, most major chains are opening early.

Kmart is opening all day Thanksgiving from 6 a.m. to 11 p.m. Toys R Us Inc. is moving up to 5 p.m., Best Buy Co. to 6 p.m., and Gap's Old Navy to 7 p.m. Macy's, Kohl's, Target Corp., and J.C. Penney have advanced to 8 p.m. Last year, midnight openings were popular among retailers; in previous years, early Black Friday morning ones were.

The earlier openings are no panacea because they'll simply pull purchases forward, rather than driving incremental sales, said Pam Goodfellow, a director at Prosper Insights & Analytics, a Worthington, Ohio-based research firm.

"Once they have spent their money, it is hard to coax them back out into the stores," she said.

The National Retail Federation, a Washington-based trade group, is more upbeat than ShopperTrak. It has forecast that U.S. retail sales may increase 3.9 percent during the holiday season. That increase would be slightly higher than last year's 3.5 percent gain.

Representatives for Macy's and Gap declined to comment, while Sears and J.C. Penney representatives didn't respond to requests for comment. Randy Hargrove, a Wal-Mart spokesman, pointed to comments from the third-quarter earnings call when the company said while the holiday would be competitive, that it was committed to being the No. 1 retail destination.

Share this page
Comments ()
Guidelines: Keep it civil and on topic; no profanity, vulgarity, slurs or personal attacks. People who harass others or joke about tragedies will be blocked. If a comment violates these standards or our terms of service, click the X in the upper right corner of the comment box. To find our more, read our FAQ.
    help here