U.S. News

Retail Watch: No Fire Sales for Last-Minute Holiday Shoppers

Tara Siegel Bernard

Attention holiday shoppers: Waiting until the last minute may land you a few deals, but you may not find the gift you're looking for.

With just seven shopping days left, the biggest sales are likely to occur the weekend before Christmas, which falls on a Monday. However, retailers didn’t overstock their shelves this season, so procrastinators may find limited selections.

“The big thing I noticed this season was very cautious inventory management,” said Richard Hastings, senior retail analyst with Bernard Sands. “(Retailers) will be highly promotional, but inventories will be limited, so the early bird specials will be key.”

How retailers fare this season hinges on this week and how much they are forced to offer aggressive discounts, which cut into profit margins. Another factor is the increasingly popular gift card, where sales aren’t booked until the cards are used. And by one estimate, nearly 40% of cards aren’t spent until January.

"Make or Break" Time

“The coming week is a real ‘make or break’ time, as anywhere between one-fifth and one-third of the buying activity in items like apparel and jewelry often takes place in the final five days of the holiday retail season,” said David Rosenberg, North American economist at Merrill Lynch, said in a note. “The major point is that there are still too many unknowns to be making prognostications at this point, largely because of the gift card phenomenon.”

The busiest shopping day tends to be the Saturday before Christmas. Since inventory levels are manageable, many retailers aren't expected to hold fire sales to unload merchandise. But last-minute shoppers will find major markdowns in select areas, especially apparel and winter accessories given the unseasonably balmy weather across much of the country.

“Apparel has had a terrible season so far, so I would expect them to be more promotional,” says C. Britt Beemer, chairman of America’s Research Group, a consumer-marketing firm in Charleston, S.C. He also expects to see discounting at department stores and home retailers like Pier One.

However, “Best Buy and Circuit City won’t be as promotional because electronics have been so hot. They ran some pretty big discounts (earlier in the shopping season) and they have been hot all Christmas,” he said.

Some Electronics Discounts

Still, shoppers might find promotions on specific electronic goodies. The price of median plasma television at Best Buy and Circuit City have recently fallen, said analyst Matthew Fassler at Goldman Sachs in a note.

"The vendors are really driving pricing down at same time distribution is broadening," Colin McGranahan, retail analyst at Sanford C. Bernstein, told CNBC's "Power Lunch." "Some of the discount retailers, the Wal-Marts, the Targets, and certainly Costco, are bigger players with flat panel TVs then they have been in the past. That is creating a much more competitive environment, even though the category is one that people want."

Sweaters, fleece items and outerwear remain the most aggressively discounted products.

“Although heavy markdowns should help, it may be difficult to entice consumers to purchase cold weather items given unseasonable warm weather, in the 50’s and 60’s,” says Kimberly Greenberger, retail analyst at Citigroup. “Consequently, we believe cold weather apparel remains a significant markdown liability for many retailers.”

Promotions at Ann Taylor , Gap , Gap's Old Navy, Hot Topic and Children’s Place , were above last year’s levels, she says, while markdowns at American Eagle Outfitters , Torrid, a Hot Topic unit, and Bath and Body Works, a unit of Limited Brands , were below last season.

No "Must Have" Item

“I think it’s been a very tough Christmas season without any must-have item,” adds Beemer,  noting that other in-demand items like hot video consoles were hard to find. “When you find out the number one toy was Barbie, it tells you there is nothing new out there.”

He expects holiday same store sales to be 2.7% above 2005, when sales were up about 3.1%. Excluding Wal-Mart, he expects sales will rise about 3.5% to 4%.

“The deals will continue to be good (this week), but retailers are definitely not panicking,” said Ellen Davis, senior director at the National Retail Federation, noting that retailers have been promoting pretty aggressively all season. “However, that’s also when selection can tend to be low, so people who choose to wait until the last minute with the hopes of getting low prices might have to deal with whatever is left over.” 

Online shopping has been brisk. Consumers spent $19.48 billion online for the first 45 days of the holiday season ending Dec. 15, up 25% from last year, according to ComScore Networks.

Aggressive Effort Online

“Retailers have been aggressive this year with their online marketing efforts, targeting consumers with early season promotions,” said Gian Fulgoni, ComScore chairman, in a statement. “And now they’re looking to finish off the season strong by tempting consumers to continue shopping online later, with guarantees of on-time delivery for items purchased as late as Dec. 18.”

Consumers seem to be biting. Sales on Dec. 15 were up 38% versus last year, indicating consumers’ willingness to continue shopping online later into the season. The biggest online   shopping day arrived on Dec. 13, when consumers logged nearly $667 million in sales. Later shipping deadlines could keep online sales in full swing early this week, Fulgoni says.

And remember, the shopping season won’t end with Christmas. The week after Christmas represents about 10% of holiday sales, according to the National Retail Federation. And gift card sales aren't registered until after Santa makes his appearance, when consumers tend to spend more than what the card is worth.