Discounts lure shoppers, but sales stay slow

MILWAUKEE - Steep discounts on clothes, toys and electronics enticed shoppers to stores this weekend but they still are making fewer purchases leading into the final stretch of the holiday shopping season.

Based on early reports from analysts and malls, sales results were generally mixed to moderately down even as store traffic appeared strong this past weekend, the second-to-last of the season that can make or break many retailers.

Stores offered big discounts to shoppers who have been pulling back their spending, concerned about the recession and job stability. Shoppers came to stores for these discounts but largely stuck to their shopping lists and basic items like clothing, analysts say.

Traffic levels at stores were comparable to last year, said Marshal Cohen, chief industry analyst at market research group NPD Group. People were looking for deals but not as willing to spend their money as last year.

“The number of consumers actually making purchases were down and when they did purchase they purchased less,” Cohen said.

Results were mixed across the country, with electronics still doing well and stores like warehouse-club operator Costco Wholesale Corp., he said, were mobbed.

“It wasn’t as good as last year but it wasn’t as doom and gloom as everyone was expecting,” he said.

This Saturday was the strongest yet this season, said Karen MacDonald, a spokeswoman at mall operator Taubman Centers Inc. Traffic was up at stores throughout the country, but in terms of sales, business overall ranged from slightly above, to flat, to slightly below last year’s levels, she said. Apparel was a top seller while high-end jewelry and home furnishings were weak.

Figures released Sunday by SpendingPulse pointed to more signs that shoppers are continuing their frugal ways, despite a decent Black Friday spending surge. SpendingPluse is a data service provided by MasterCard Advisors that estimates U.S. retail sales across all payment forms, including cash and checks.

From Nov. 28, the day after Thanksgiving known as “Black Friday,” through Dec. 6, luxury sales dropped 34.5 percent compared to the same period last year, while overall apparel sales fell 22.9 percent. Electronic sales fell 22.3 percent.

Michael McNamara, vice president at SpendingPulse, said consumers are resisting big-ticket items priced $1,000 or more.

“Spending has obviously contracted, but the key question is will it contract even further,” he said.

Online sales last week fell 1 percent to $3.81 billion from the same week last year, according to research company comScore Inc., which called the drop ’marginal.’

From Cyber Monday on Dec. 1, which marked the kickoff to the online holiday shopping season, through Friday, sales were up 3 percent to $8.26 billion from last year, the firm said Sunday. Tuesday last week marked the heaviest online spending day on record with $887 million in sales, the firm said, adding that it expects online retailers to continue offering discounts on products and expedited shipping to spur sales. It noted apparel and accessories sales were up 21 percent in the first 12 days of December, while books and magazine sales rose 18 percent.

But not all shoppers are easily parting with their money.

John Collins, an event planner who lives in Brooklyn, was at Crate & Barrel in Manhattan looking at table lamps and a fondue set. But he wasn’t sure if he was going to buy anything. He said he wasn’t feeling inspired to buy considering everything that’s going on.

“It’s not the time to spend money on lavish presents,” he said. “It’s time to get back to smaller, thoughtful presents, especially with an uncertain year coming up. No one I know wants to spend a fortune right now.”

This season could shape up to be the worst in decades as the economy spins into recession and consumers worry about their slumping investments, rising prices and job stability.

Same-store sales are expected to be down as much as 1 percent in November and December, according to Michael P. Niemira, chief economist at the International Council of Shopping Centers.

If that holds true it would mark the weakest season since at least 1969 when the index began. The only holiday period that was almost as weak was 2002, when same-store sales rose by only 0.5 percent, Niemira said. Same-store sales are sales at stores opened at least a year and are considered a key indicator of a retailer’s health.

Slumping sales are weighing on retailers. Last week they forced retailer KB Toys to file for bankruptcy protection for the second time in four years. The 86-year-old company plans to begin going-out-of business sales at its stores immediately.

With spending expected down, stores have been stepping up their discounts to try to capture whatever money consumers decide to part with.

At The Mall at Short Hills, N.J. the storefronts featured bold discount signs to lure consumers in. Chico’s FAS Inc. offered shoppers up to 65 percent off, while Cole Haan offered $50 off purchases of $250 or more. Ann Taylor Stores Corp.’s Loft division slashed its clearance merchandise an additional 40 percent, making items like colorful suede shoes, originally priced at $79, now marked down to $12.88. Saks Fifth Avenue reduced its sale prices by half, for a total of up to 70 percent off.

Consumers had said all along they were going to cut their spending, stick to basics and look for deals, and they’ve kept their word, said C. Britt Beemer, chairman of America’s Research Group. Retailers got them to come out to stores with discounts of 50, 60 even 70 percent off, but this weekend discounts didn’t translate into sales.

“The malls had traffic but the stores didn’t seem to be so swamped,” he said.

Apparel seemed to be a big item this weekend, he said, especially for children. Many parents skipped out on back-to-school shopping this fall and are now looking for clothing deals as Christmas gifts. They’d rather cut spending on themselves before cutting spending on their kids, he said.

Toys R Us Chief Executive Jerry Storch said people still want to buy toys for their kids, and traffic was strong this weekend.

“What we’ve heard from the customers is that the last thing they’re going to cut from their budget is a toy for their child and that’s held up consistently,” he said.

Michelle Acton was looking for deals when she took her children, 5 and 1, to Target in Brentwood, Tenn., near Nashville, to pick out Christmas gifts using money sent from relatives. She spent $80 on action figures and a set including a stroller and play pen for a baby doll.

Acton, a nurse, is looking for deals and spending less on gifts this year because her husband was laid off from his job in the drywall industry in February. She said the family has been pinching pennies ever since.

Lisa Cumbey, 49, of Richmond, Va., said that with her big circle of friends and large family, she’s cut her spending this year. People are moving away from the need to buy things, she said at Mongrel, a gift shop in Carytown, a trendy stretch of boutiques near downtown Richmond, Va.

“Our families all agreed not to do presents, our co-workers all agreed not to do presents, so I’d say we’ve cut it by 80 percent,” Cumbey said. “Nothing extravagant.”

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