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Santa Sitting With the Pumpkins

The leaves on the trees have hardly started to turn colors, but some folks are already dreaming of a white Christmas.

AP

Last year about 40 percent of people started their holiday shopping before Halloween, according to BIG Research. That’s one reason why you’ll see Santa cozying up to pumpkins at the store. Retailers are bracing for a dismal holiday season and know they can’t afford to miss a single sale.

This is because the vast majority of consumers polled by BIG Research — some 60 percent — said they expect to spend the same or less than they did last holiday season. (And that’s only counting the people who have some idea of what they will spend now – some 21 percent said it was too early to gauge their spending. There’s a good chance some of those folks will spend less than last year too.)

All told, the National Retail Federation forecasts sales will rise only 2.2%, or the smallest increase since 2002. Other projections are even worse: market researcher TNS Retail Forward expects sales to rise just 1.5% in the fourth quarter, below tepid sales gains in the third period.

And analysts clearly expect retailers will be looking to lure customers into their stores with sales and promotions, putting pressure on profits.

Investors take note: Wal-Mart is stealing a page from last year’s playbook. The world’s largest retailer announced last week it is slashing prices on popular toys and accelerating the opening of its Christmas shops.

The strategy worked well for it last year because it clearly telegraphed the message that it was the place for cash-strapped consumers to save.

But Wal-Mart says the reason behind their move is an anticipation that consumers, pinched by high food and energy prices and falling home values, will be spreading out their purchases over a longer period of time in order to stay within their budget.

It may be wise for consumers to be among the early birds flocking to stores. Retailers, keen on staying in the black, will be keeping inventories lean and hot items are sure to go fast.

Questions? Comments? retaildetail@cnbc.com

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