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Stores Seek Shoppers, Slash Prices Again

By ANNE D'INNOCENZIO
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.

Analysts were debating whether the unimpressive season was a reflection of consumers having spent conservatively because they're tapped out.

"Whether this suggests a (weakening) consumer or changes in buying patterns is difficult to gauge at the first brush," said Dan Hess, founder and CEO of Merchant Forecast, a research company.

Visa USA's Best said he believes the slowing housing market had more of a negative impact on holiday spending than analysts originally thought. A big source of spending in recent years has been from home equity refinancing, which allowed shoppers to extract cash from their inflating home values; refinancings have dropped sharply as interest rates have risen.

Marshal Cohen, chief analyst at NPD Group Inc., a market research company, blamed the increasing popularity of gift cards for "taking the impulse out of holiday shopping."

Online retailers had a better season than more traditional merchants. Online spending from Nov. 1 through Wednesday reached $21.68 billion, a 26 percent increase compared with 2005, according to comScore Networks, an Internet research company. The results exclude travel, auctions and corporate purchases. That was better than the 24 percent rise in online spending ComScore expected.

Amazon.com said Tuesday the season finished as its best ever, with the busiest day being Dec. 11.

Yahoo! Shopping reported Tuesday that its holiday season beat internal forecasts. It said the number of shoppers to the site rose 34 percent in December compared to the year-earlier period. Traffic to merchants rose 30 percent in the past month, compared to the year-earlier period.

Shoppers interviewed at stores and malls Tuesday seemed pleased with what they found.

"The atmosphere is really nice," said Ethel DuBoise, of Nashville, Tenn., who was looking for "good buys" at a local Macy's store. "There's no hustle and bustle."

Some had delayed their holiday gift shopping to get the best bargains.

"I got ornaments for some friends, some belated Christmas gifts. I won't be seeing these people until after the New Year," said Hannah Teppert, of Des Moines, Iowa.

At the Beverly Center mall in Los Angeles, Courtney Virdo, who arrived at 7:30 a.m., quickly bought two large bags of merchandise from a shoe store.

"I have rent to pay, but I'll probably spend about $700, which is bad, but it's worth it. I can get triple of what I usually get," she said.

____

AP Writers John Kekis in Syracuse, N.Y., Solvej Schou in Los Angeles, Steve Hartsoe in Raleigh, N.C., Travis Loller of Nashville, Tenn., and Nafeesa Syeed in Des Moines, Iowa contributed to this report.

© 2006 The Associated Press