Holiday Sales Get Off to a Slow Start

The U.S. holiday shopping season got off to a slow start as consumers, squeezed by the economic crisis, bought carefully and said they would wait for better deals closer to Christmas.

Early results from the Black Friday weekend, which kicks off holiday sales one day after Thanksgiving, bolstered forecasts by some analysts that total holiday sales could contract for the first time since that data started being collected in the early 1990s.

ShopperTrak, which measures customer traffic, said Saturday that Black Friday sales rose 3 percent to $10.6 billion. That was slower than an 8.3 percent rise in 2007.

"The initial response by many people may be positive," said Telsey Advisory Group analyst Joseph Feldman of the increase.

But, Feldman said, excluding inflation the sales figures are roughly flat year over year. His firm still expects overall holiday sales will be flat to slightly down.

Shoppers interviewed Saturday said they were disappointed by the deals this weekend and bet stores would offer even steeper discounts in the weeks to come -- a worrisome sign for retailers struggling with weak profits.

"I'm not happy with the prices," said Rose Fernandez, shopping at a Macy's in Jersey City, New Jersey. "If it's worth the money, I would pick it up... If I can wait, I wait and watch. I can wait even till the day after Christmas."

ShopperTrak noted that stores would have a shorter holiday season, with 27 days between Thanksgiving and Christmas, compared with 32 days in 2007.

"(That) may catch some procrastinating consumers off guard, leading to lower sales levels," said Bill Martin, co-founder of ShopperTrak.

Layoffs Put Purchases on Hold

Retailers are facing what could be the weakest sales season in nearly two decades as shoppers contend with falling home values, reduced access to credit and a weak job market.

The three-day Thanksgiving weekend can account for 10 percent of overall holiday sales and has taken on added importance this year as the country seeks a way out of its worst economic crisis since the Great Depression.
Heidi Hickman, a marketing manager, was browsing at a J.C. Penney store in Jersey City's Newport Centre mall on Saturday but gift-buying was not on her mind.

"I got a notice there are going to be layoffs in my department," she said. "It's making me stop right now and not do anything until I find out."

If sales for November and December decline, it would mark the first contraction since the National Retail Federation began tracking holiday sales in 1992.

"I have very little confidence that the sales number will be up year-over-year," for the season, said Stacey Widlitz, retail analyst with Pali Capital.

In a highly competitive battle to attract shoppers, some retailers, including Kmart, opened on Thanksgiving day, while others began sales Friday right after midnight.

In Chicago, Gap's Old Navy chain opened at 7 a.m. Saturday but an employee said there was little to do until 9 a.m., when shoppers finally began to arrive.

A nearby Sears had cut prices on holiday decorations by 60 percent, while clothing retailer Charlotte Russe tried to entice shoppers with a deal to buy one item and get another item for 50 percent off.

Penney said Black Friday shopping was strong as consumers sought deals on practical gifts, like sweaters. But it did not release sales figures for the weekend, saying the economic environment was too volatile.

Amazon.com said Apple's iPod touch, which has a touch-sensitive screen, was its top-selling electronics item Black Friday morning, while the Wii Fit, for Nintendo's Wii video game console, was its most popular video game.

SHOPPERS EXPECT PRICES WILL FALL

As shoppers sought low prices online, eBay's Web payments service PayPal saw 34 percent more transactions on Black Friday than in 2007 and showed a 26 percent increase in online payment volume.

Christina Cheddar Berk, CNBC Shoppers at a GameStop in Woodbridge, N.J., wait for the store to open early Friday morning.

In Los Angeles, Jenipher Park, 36, and Keri Yang, 34, bought boots at Nordstrom Saturday, but both were expecting bigger discounts.

They said they will delay more purchases to get better deals closer to Christmas, and this year the two moms are planning to only get gifts for their children.

Many shoppers echoed those sentiments, saying they would find other ways to celebrate with adult relatives and friends.

Some were already turned off to the very idea of shopping.

"I'm not into shopping this year like I was the year before," said Rolando Ramos, 29, on a visit to Chevy Chase, Maryland. "It's very depressing. Go to the malls, just looking around, it's deserted."

Widlitz said she expected discount behemoth Wal-Mart to win shoppers this holiday because of its low prices.

At a Wal-Mart store in Columbia, Maryland, Friday, the parking lot was full at 7:30 a.m. and customers stood in line 10 shopping carts deep to make purchases.

Copyright 2008 Reuters. Click for restrictions.