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Holiday Shoppers Rally for Retailers

By Ylan Q. Mui
Washington Post Staff Writer
Saturday, December 13, 2008

New economic data released yesterday offered a glimmer of hope in what has been a dismal holiday season for retailers as consumer confidence posted a surprising jump and sales were not as gloomy as expected.

The Commerce Department yesterday said retail sales in November fell 1.8 percent compared with the previous month -- the fifth consecutive monthly decline, but not as steep as October's 2.9 percent drop. Excluding restaurants and auto dealers, November retail sales dropped 2 percent compared with the previous month.

"I wouldn't go so far as to say we're bottoming out," said Stacy Janiak, U.S. retail leader at consulting firm Deloitte, whose consumer spending index stabilized last month. "I think we're having a natural reaction to the holiday when people are spending when they might not otherwise."

November is seen as the kickoff to the crucial holiday shopping season, which accounts for roughly 20 percent of annual retail sales. The month benefited from falling gas prices, which gave consumers a little more cash in their pockets and perhaps also lifted their spirits. The Reuters/University of Michigan consumer sentiment survey showed that early December polling put the consumer confidence index at 59.1, up from 55.3 in November. Many economists had expected the index to drop.

Shoppers also flocked to the stores the day after Thanksgiving -- commonly called Black Friday -- in search of heavy discounts on electronics and apparel. Although that helped mitigate the monthly decline, sales were still far below where they were last year.

"I think there's some hope," said Rosalind Wells, chief economist for the National Retail Federation, a trade group, of the remainder of the holiday season. "That doesn't mean that it's going to be as good as the retailers like it to be."

Indeed, several other indicators have hit the retail industry like a lump of coal this month. About 40 national chain stores last week reported the worst November sales in more than 30 years at established stores when compared with the same month in 2007. A study by research firm ShopperTrak found retail foot traffic plunged a dramatic 16.7 percent in November compared with last year.

"November's sharp traffic decline points to a rather uncertain consumer in today's volatile retail marketplace," said Bill Martin, co-founder of ShopperTrak. "There have been myriad economic pressures influencing consumer behavior. And these pressures seemed to have come together in November, forcing the largest traffic decline we've seen this year."

In the Commerce Department data released yesterday, several categories helped to alleviate the gloom. Electronics and appliance stores experienced sales growth of 2.8 percent in November compared with the previous month.

Many stores offered aggressive promotions on Black Friday, with such products as Nintendo's Wii and laptop computers still high on wish lists. But when compared with November 2007, sales plummeted 4.7 percent -- a sign that shoppers are closely watching their wallets.

Department stores had a similar showing. November sales rose 2.1 percent compared with October as department stores upped efforts to win over customers. Macy's reported 5,000 people waiting outside its flagship store in New York on Black Friday, and JCPenney said the weekend was a bright spot in what has been a difficult year. But November sales at department stores were still 4.6 percent below last year.

Several categories enjoyed both monthly and yearly gains. Grocery stores rose 0.2 percent in November compared with the previous month and 3.5 percent compared with November 2007, though some of that gain may be attributed to higher food prices. Sales at health and personal care stores grew 1 percent compared with October and 5.2 percent compared with last year. General merchandisers jumped 1.2 percent from October and 2.6 percent from last year.

But retailers aren't breaking out the eggnog, yet. The battle for customers is only intensifying during the final leg of the Christmas shopping marathon.

JCPenney's advertising circular yesterday boasted 250 "door-buster" deals starting today at 6 a.m. on everything from bath towels to jewelry boxes. Toys R Us advertised "deals of the century" on a Kung Fu Panda sword and a Huffy scooter. Wal-Mart announced yesterday several aggressive discounts that will take effect tomorrow, including a $398 32-inch flat-panel television or Toshiba laptop. The company said it expects the discounts to save shoppers $100 million in the weeks before Christmas.

At Tysons Corner Center this week, signs for 50 percent off or more vied with holiday decor for space in store windows. John and Karen Chaffee of Williamsburg spent one morning browsing for holiday gifts for each other. She went to Nordstrom; he went to Lord & Taylor. They both said they weren't intentionally planning to spend less, though John, 62, said that "tears well up when I look at my [retirement] accounts."

Still, they treated themselves to their traditional holiday dinner at a French restaurant this week and took in a Boston Pops concert recently. While shopping at Tysons, Karen, 55, even donned a festive red sweater decorated with snowflakes.

"It's still fun," she said. "I got into the spirit."

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