It looks like Santa’s on his way: Holiday store discounts loom...

The Tacoma News Tribune ^ | November 12, 2007 | Sandra M. Jones

[2ndDivisionVet]

A disappointing October sales report Thursday sent a clear signal to retailers that they’ll have to pull out all the stops to get shoppers into their stores this holiday as declining home values, tighter credit terms and rising gas prices appear to have left consumers feeling spent.

The nation’s biggest chain stores posted the second consecutive month of weak sales results, underscoring their concerns that sales growth this holiday season could be the slowest in five years.

“Consumers are exerting a lot of caution,” said Mandy Putnam, vice president at TNS Retail Forward Inc., a Columbus, Ohio-based market research and consulting firm. “Even with the number of promotions breaking early right now, retailers are really going to have to work hard to get them into the stores this season.”

Many retailers blamed the weather for some of the shortfall, suggesting that an unusually warm October deterred shoppers from buying fall sweaters, fleece and coats.

“It’s going to be a heavy discounting holiday season,” said Chris Terry, an analyst at Hodges Capital Management, which owns Kohl’s and Costco among its $1.3 billion in assets under management. “Consumers are getting stretched. Discounts are going to be more widespread.”

Sales at chain stores opened at least a year rose 1.6 percent in October compared with the same month last year, and below the forecast of 2.4 percent growth put forth by the International Council of Shopping Centers. September sales rose 1.7 percent.

Consumer spending drives the economy, accounting for more than two-thirds of economic activity. If consumers stop spending, it’s “highly unlikely” that the U.S. will be able to avoid a recession, said Scott Hoyt, director of consumer economics at Moody’s Economy.com in West Chester, Pa.

“Clearly the economy is in a more uncertain position and there are fears of a recession we haven’t had in a few years,” said Hoyt. “Therefore you want to watch the biggest piece of the economy very carefully.”

Wal-Mart Stores Inc., the world’s largest retailer, eked out a 0.4 percent sales increase by getting a jump on the holiday with early discounts on toys and electronics. Midtier department stores and mall-based specialty stores fared poorly, posting across-the-board declines. The lone standouts were luxury department stores.

Same-store sales fell 3.8 percent at Kohl’s Corp., 1.8 percent at J.C. Penney Corp. and 1.5 percent at Macy’s Inc. Even Nordstrom Inc., which had been largely untouched by the slowdown thanks to its upscale slant, saw its same-store sales fall 2.4 percent.

Among specialty stores, same-store sales were even more disappointing, falling 8.0 percent at Gap Inc., 6.0 percent at Limited Brands Inc., 4.2 percent at AnnTaylor Stores Corp. and 10.6 percent at Chico’s FAS Inc.

Stores that attract affluent shoppers outperformed in large measure the rest of the industry. Same-stores sales rose 8.5 percent at Neiman Marcus Group Inc., 10.6 percent at Saks Inc. and 9.0 percent at Costco Cos. Inc.

Target Corp., the discounter that caters to a higher-income shopper than rival Wal-Mart, reported a 3.9 percent same-store sales gain but warned investors that its stores are experiencing “soft sales in our higher-margin categories.”

Same-store sales measure sales at stores open at least one year and are a closely watched measure of a retailer’s health. Retailers typically generate 20 percent to 25 percent of their annual sales in November and December.

Wal-Mart, Target and J.C. Penney forecast that same-store sales will increase in the low single digits in November.

So far consumers have managed to continue to spend even as the housing and credit markets tumble. But economists are watching this holiday closely to see if consumer behavior changes.

[gardengirl]

I’m not advocating not giving gifts. I love to give, more than to receive. It’s jsut a different world. My kids have more in their bedrooms than I had when I got married. They think nothing of going to Bojangles every morning for breakfast—their money, so... When I was little—oldest of five—I can only remember going to MacDonald’s once or twice, and we had to split a burger and fries.

[chiefqc]

What discounts? The stores mark up the price of an item by 50% then put in an ad that they are marking down the item by 15% and people think that this is a discout when in fact it’s really a mark up og 35%.

Some discont.

[phillyfanatic]

Oh go out and buy. Go into debt so we can give the Dems even more wild thorns up their you know what to raise taxes and cut all those deficits that bad old consumers will account for. I am so sick of Dems, taxes, and the nonsence of deficits that I say, let the markets decide. Period. Go for those discounts and keep everybody happy but the Left.

[varon]

Now what do you get 5 and 10 year old boys?

That's easy. Make homemade slingshots and get a bag of gravel from the gravel pit.

Then sit back and enjoy and see which comes first; the boys run out of "ammunition" or neighbors, out of windows ;-)

[rb22982]

50% markup before all of the other costs of running a business. Retails NET margin after all is said and done is one of the lowest (if not the lowest) of any industry out there. Walmart sells something in the neighborbood of 380 billion each year and yet net only around 11 billion (around 2.9% net of sales [The private retail company I work for nets around 7.5% of sales]). Exxon had 400 billion in sales and netted around 40 billion or nearly 4x the overall gross (10% net of sales). Citi had revenue of 62 billion and a net of around 18 billion--and that's during the huge subprime crises or a whopping 25% net of sales.

Retail cutting prices 15% indeed does have a huge impact on their business.

[Revolting cat!]

Why would I want to buy a loom?!