Looks ahead more economic trouble is ahead for G.W.
Weak Holiday Sales Prompt More Discounts
Retailers are expected to increase discounting in the final days before Christmas after a late-buying binge failed to materialize during the last weekend before the holiday. And that's fueling worries that industry profits could be hurt in the fourth quarter.
"You will really see some dramatic desperation discounting" this week, said Burt Flickinger III, managing partner at Strategic Resource Group, a New York-based industry consultant. He estimated that profit margins will be cut by 3 percent to 5 percent in the fourth quarter as a result.
Merchants needed a hefty sales surge this past weekend to recoup lost business after seeing a slow start to a holiday selling season that never gathered steam. Now, they'll have to rely even more heavily on procrastinators during the final days before Christmas and post-holiday sales -- expected to be boosted by the redemption of gift cards -- to meet their holiday sales forecast. Gift cards are only recorded as sales when recipients redeem them.
ShopperTrak, which tracks sales at 30,000 retail outlets, reported on Monday that total sales fell 3.3 percent for Saturday and Sunday, compared with the same two days a year ago.
Jim Neal, a principal at Kurt Salmon Associates, also reduced on Monday his holiday sales forecast to the low end of his initial range of 3 percent to 3.5 percent. And he questioned whether "unplanned specials" will work. "Are consumers going to jump back in the car and get items that are on sale that are not on their list?" he asked.
Luxury stores -- which have enjoyed robust sales as their well-heeled customers have benefited from the economy's recovery -- had the best performance over the weekend, despite offering only selected discounts.
The poor are ripped off by G.W again and again.
In contrast, mid-priced merchants like Sears, Roebuck and Co. that cater to middle- and low-income shoppers -- who have pulled back on spending as they have been more vulnerable to higher heating costs and a volatile job market -- are being forced to keep trying to pull in customers with big discounts and expanded hours this week.
J.C. Penney Co. will be opening at 7 a.m. from Wednesday through Friday, offering deals on jewelry and coats. Sears is offering discounts of between 40 to 60 percent on jewelry and 25 percent to 30 percent off of watches from Monday through Friday, according to Bill Masterson, a company spokesman.
Sears, Penney, AnnTaylor Stores Corp., Gap Inc.'s Old Navy and Limited Brands Inc's Express stores were among the chains that discounted more heavily over the weekend than on the same Saturday a year ago, according to Margaret Mager, an analyst at Goldman Sachs.
Flickinger expects that stores this week will take additional discounts on heavy winter apparel like outerwear and sweaters, which have been hurt by seasonally warm weather.