Stores Seek Shoppers, Slash Prices Again

The Associated Press
Tuesday, December 26, 2006; 10:41 PM

NEW YORK -- Retailers regrouped Tuesday, hoping that after-Christmas shopping would help them make up for a holiday season that fell short of expectations, while their customers were back in the stores looking for deeper and deeper discounts. With mounds of unsold winter clothes to move out, retailers were further slashing already heavily marked-down goods _ a typical response to a less-than-satisfactory season.

At a Bath & Body Works store in Buckland Hills mall in Manchester, Conn., Maria Ness was loading up on hand lotions and other items for herself.

"I've been waiting for the sale," Ness said.

Many shoppers were armed with the gift cards they just received. Josh Hefner was pushing a cart loaded with a wreath, decorative lights, tree ornaments and wrapping paper through a Target store in Apex, N.C.

"We need pretty much everything," Hefner said. "We got gift cards and we're using those for these supplies."

Despite crowded stores Tuesday, the holiday season looked to be a disappointment for many retailers. After a stronger-than-expected showing on Black Friday, merchants struggled through most of December, and the shopping surge in the final days before Dec. 25 wasn't big enough to make up for lost sales earlier in the season.

But retailers, who expect to bring in a sizeable part of their holiday sales after Christmas, were hoping that bargain-hunters would save the season for them, as they have done in past years, and that consumers redeeming gift cards would also give them a sales pop. What remained to be seen was how heavy a toll deep even deeper discounting _ particularly on slow-moving winter clothes _ would take on merchants' fourth-quarter profits, especially if consumers continue to shy away from those goods.

Several analysts were already racheting down their forecasts Tuesday, resigned to the fact that the season won't be as good as they had hoped. Bill Martin, co-founder of ShopperTrak RCT Corp., a Chicago-based research company, which tracks total sales for more than 45,000 retailers, said he now expects holiday sales growth could be as low as 4.5 percent; he had originally forecast a 5 percent gain.

Michael P. Niemira, chief economist at International Council of Shopping Centers, pared his same-store sales growth forecast for the November-December period to 2.5 percent from his original 3.0 percent. Same-store sales, or sales at stores opened at least a year, are the industry standard for retailers' health.

Visa USA shaved its holiday growth forecast to 6.5 percent, from 7.5 percent.

"Sales continued to be soft across most merchants' segments," said Wayne Best, senior vice president of business and economic analysis for Visa USA. The forecast excludes auto sales.

The big exceptions were luxury and online retailers, both of which surpassed their sales expectations. But electronics retailers Best Buy Co. and Circuit City Stores Inc., who successfully used discounts to bring in sales on competitive items like flat-screen TVs, were likely to see their profits suffer. Moreover, mild weather across much of country meant shoppers were in no hurry to buy cold weather items like coats and gloves, depressing apparel sales and the profits on those items.

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© 2006 The Associated Press