Retailers slash prices in effort to boost sales
NEW YORK — With just a few days left before Christmas, the nation's retailers are in a lather to attract last-minute shoppers to salvage what has been a mediocre December.
Department-store operator Macy's Inc. has slashed prices on everything from clothing to jewelry, while Toys "R" Us is offering price cuts up to 75 percent this weekend. At stake are retailers' profits for the year and perhaps even the strength of the economy.
Consumers jammed stores at the start of the season for big discounts and shopped early for Nintendo Co.'s hard-to-find Wii game console, popular video games like "Guitar Hero III: Legends of Rock" and Australian sheepskin UGG boots, but they waited until the end for almost everything else to take advantage of the best deals amid a challenging economy.
The biggest disappointment comes from women's apparel, extending a downturn that has grown deeper in recent months and serving as an ominous sign for the health of retailing in general. Women do the main shopping for the family, so analysts say it's troubling that they are spending less time in the stores.
"I have no money or time to shop," said Tina Morabito, who just started her holiday shopping Friday morning at the Providence Place Mall in Providence, R.I. She was buying some greeting cards and mint chocolates but didn't plan to buy clothing.
"There's been a malaise" among women's clothing sales and "it has spread to other areas," said Dan Hess, chief executive of Merchant Forecast, a New York-based research firm. "The panic button has been pushed, particularly in department stores."
Even with an expected sales surge this weekend, which traditionally accounts for about 10 percent of holiday sales, Lazard Capital Markets analyst Todd Slater expects that the last-minute spending will be "too little, too late" to save Christmas.
"When people think they are in a recession, they spend like they are in a recession," Slater said.
A series of snowstorms hampered spending in recent days, but clearly, economic worries — especially higher gas prices, an escalating credit crisis and a slumping housing market — weighed on shoppers' minds.
According to ShopperTrak RCT Corp., a research company that tracks total sales at more than 50,000 retail outlets, business for the week ended last Saturday slipped 0.4 percent compared to the same week in 2006. Total U.S. traffic for the same period fell 8.9 percent from a year ago.
The apparel market was hit even harder because there was nothing new that wowed shoppers. The new style — cropped jackets with bell sleeves — failed to generate a lot of buzz, said research analyst Jennifer Black.
Hess estimated that discounts at department stores are about 10 percent to 15 percent higher than a year ago, a worrisome sign for profits. Price cuts at specialty clothing stores, which had better control of their inventories, were at the same level as a year ago.
Slater said he estimates that large department stores are missing their sales plan by as much as 10 percent so far in December.
Slater noted that even gift card sales have been disappointing. In some cases, the gift card business may be "even down," based on spot checks with retailers.
Gift card sales have been a bright spot in recent years, though they lower pre-Christmas business because sales are not recorded until recipients redeem them.
The toy industry is expected to match last year's sales at best. In addition to a challenging economy, the industry was hurt by a slew of recalls of Chinese-made products that made some shoppers cautious.
Online retailers, which have had an uneven season, are ending with a strong finish. According to ComScore Inc., consumers spent almost $25 billion online from Nov. 1 through Dec. 18, a 19 percent increase, though a bit below ComScore's 20 percent forecast.
While it's hard to discern how much of the discounting in the final hours is unplanned, stores clearly are slashing prices to eke out sales wherever they can.
Toys "R" Us stores are staying open until midnight every night until Christmas Eve. Beginning Friday at 7 a.m., several of Macy's stores in the New York metropolitan area, including its flagship store in Manhattan, opened and were not to close until 6 p.m. on Christmas Eve.
At Macy's Herald Square store, the entire inventory seemed to be on sale. Plenty of women's career apparel was discounted by 50 percent, for example.
"I usually do all my shopping on Black Friday. But I missed it. So I waited for the deals," said Goednee Coteland of Manhattan, who was leaving Macy's Herald Square store Thursday night carrying bags of clothing marked down 50 percent.