In a final dash for cash, stores slash

Even carrying gift cards, shoppers remain tightfisted.

Associated Press
Published December 27, 2007

NEW YORK - The nation's retailers slashed prices further Wednesday in hopes that a post-Christmas shopping rush will salvage holiday sales that, so far, have fallen below even modest expectations. In particular, they are waiting for legions of shoppers armed with gift cards to snap up bargains and buy new merchandise still on store shelves.

Merchants in past years have received a late bounce during big clearance markdowns and find themselves again in the position of hoping that bargain-hunting consumers will come through in the end.

"Shoppers are thinking twice about what they are buying," said Jennifer Black, president of Jennifer Black & Associates, an equity research company in Lake Oswego, Ore. "There's a feeling of worry."

Black, along with other analysts, made the rounds at malls in Oregon and New Jersey, noting that even with gift cards, shoppers remained tightfisted Wednesday, focusing on bargains despite fresh offerings from merchants.

The International Council of Shopping Centers said Wednesday that same-store sales, or sales at stores open at least a year during the November-December period, are coming in just below already-slim projections for a 2.5 percent gain, though it said that a post-Christmas buying splurge could erase that shortfall. That contrasts to a more upbeat assessment from its chief economist Michael P. Niemira, following the weekend's spending surge, who predicted that holiday sales could at least meet forecasts.

"The ingredients were not there for a blockbuster season," said Michael McNamara, vice president, research and analysis, of MasterCard Advisors. "And retailers in many respects got the most out of the season that they could, based on the environment."

Shoppers jammed stores at the start of the season, but held out for deals through most of December, only to return for a last-minute spending spree when the bargains were even better. Higher gasoline prices, an escalating credit crisis and a housing slump made shoppers cautious, which has manifested itself in weakening sales growth throughout the year, McNamara said.

To spur business, stores early on were aggressive with discounting, raising concern over stores' profit picture during this crucial period. The holiday season accounts for up to 30 percent of stores' annual sales. For toy sellers, holiday business accounts for as much as 50 percent.

A better tally of how retailers fared won't arrive until at least Jan. 10, when major merchants report final same-store sales figures for December. Merchants are slated to report fourth-quarter profits in February.

The biggest loser is women's apparel, which has been one of the weakest performers and will see its profits hit hard, analysts said

"People are spending less and they're being really picky," said salesman Cleveland McMakin, who called it the worst season in his three years at Bernini.

Even $995 leather jackets marked down to $299 and $595 blazers being sold for $179 did not spark optimism.

"We've never marked stuff down this low before," McMakin said. "We're just trying to sell it."

Reeling retailers

The stock prices of several major retailers had a tough day after Christmas as investors showed disappointment in holiday season sales. A sampling :

Retailer Closing price Percentage decline

Target Corp. $51.16 2.5 percent

Macy's Inc.$25.95 3.9 percent

Lowe's Cos. $23.19 1.2 percent

Bloomberg News