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Holiday retail rush is on
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November 23, 2001: 2:37 p.m. ET
Consumers crowd malls, but expectations mixed for 'Black Friday.'
By John Chartier
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NEW YORK (CNN/Money) - Consumers crowded the nation's shopping malls Friday on what has traditionally been one of the busiest days of the year for retailers.
Shoppers flocked to discount and department stores, looking to take advantage of sales, promotions and bargains for their holiday buying.
Many retailers, like Wal-Mart Stores, said customer turnout was strong throughout the day.
"There's a lot of interest in toys, electronics and small appliances, and we are busy, that's for sure," said Tom Williams, a spokesman for Wal-Mart.
However, industry watchers and analysts have mixed expectations for sales this "Black Friday," which falls in the shadow of the Sept. 11 terrorist attacks that have slowed an already sluggish economy.
"I personally am among those with the view that we actually are going to see consumers shut down," Lara Rhame, an economist at Brown Brothers Harriman, told CNNfn's CNN Money Morning on Friday.
Rhame said many people will cut back spending by about 5 percent from last year.
The National Retail Federation, a leading retail group, forecasts holiday sales will rise only 2.5 percent to 3 percent, the worst performance since 1990, when sales were little changed. Last year, holiday sales rose about 4 percent.
While preliminary sales numbers for Friday were not available, the strong turnout sent U.S retail stocks higher during a shortened trading session. The Standard & Poor's retail index rose almost 14 points, or 1.6 percent, to close at 894.05.
Shares of Kmart Corp. (KM: up $0.28 to $6.85, Research, Estimates) and Toys "R" Us rose more than 4 percent.
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Retailers are offering steep discounts, hoping to coax sales in the wake of Sept. 11. (CNN/file) | |
Early signs encouraged some economists and retail watchers Friday.
Jackie Fernandez, a partner with Deloitte & Touche's consumer business practice, said West Coast shoppers were out in droves searching for the right products at the right price.
At the Glendale Galleria in Glendale, Calif., just north of Los Angeles, Fernandez said she thought the crowd seemed bigger than it was this time last year.
Lines of shoppers waited outside KB Toys, which was giving a way a free Barbie doll with every $100 purchase, and department store J.C. Penney (JCP: up $0.72 to $27.27, Research, Estimates), which had many of its products marked down 20 percent to 50 percent for early risers.
"All in all, I'm pretty encouraged by what I see here," Fernandez said. "It would seem to me that people are out looking for bargains right now and willing to shop as long as the price is right."
"It looks like a nice start but it's hard to tell, hard to have a perspective until we start seeing the cash register receipts," said Delos Smith, senior economist at the Conference Board, a business research group. Smith toured several New York City stores to gauge the shopping mood Friday. "It's hard to tell, but it's perfect shopping weather," he said.
The holiday season is critical for retailers, with the period between Thanksgiving and New Year's Day generating as much as half of their annual sales and profits.
Retail stocks have slumped since hijackers rammed passenger jets into the World Trade Center and Pentagon on Sept. 11. Consumers took refuge at home -- watching coverage on TV, looking to family and friends for comfort, and staying away from large public places for fear of another incident.
Many retailers, including high-profile stores such as Macy's, a unit of Federated Department Stores (FD: up $1.10 to $38.21, Research, Estimates), have significantly boosted security this season given the war on terrorism and ongoing concerns about another attack. Traffic at the nation's malls has fallen off markedly since Sept. 11, according to analysts at the Bank of Tokyo-Mitsubishi.
Some industry experts estimate retailers lost about $5 billion in sales in the weeks after the attack. The resulting downturn in spending has helped push the U.S. economy closer to recession. If holiday sales are weaker than expected, a full-blown recession will likely follow, economists believe.
The National Bureau of Economic Research, a non-profit group, could declare as early as Friday that a recession has begun.
Retailers opened their doors earlier Friday and offered some of the sharpest discounts of the year.
For the first time, Kmart Corp. (KM: Research, Estimates)'s discount stores will be open 66 hours straight, from 5 a.m. Friday until 11 p.m. Sunday. And Sears, Roebuck & Co. (S: Research, Estimates) opened its doors at 6 a.m. Friday, an hour earlier than last year.
"The competition is tougher. We recognize that consumers spend the most in the store you go to first, and we want to be the first store," Sears spokeswoman Peggy Palter told the Associated Press.
Wal-Mart Stores Inc., (WMT: Research, Estimates), the world's largest retailer, offered early-bird specials on an array of items, according to spokesman Williams. Customers were lined up before dawn at the company's stores Friday.
Click here for CNN/Money's Special Report: Holiday Retail
Sears is slashing prices in half on a number of items. Consumers can find $100 fully lined leather outwear. Kmart will open the season with $49 leather jackets and $39 George Foreman grills, with a bonus free grill.
Bloomingdale's CEO Michael Gould told CNNfn that discounts will hurt profit margins but are necessary to boost revenues.
"I think there's some margin erosion. At the end of the day it's impossible to make the profit numbers without moving the top line," Gould said. "One of the most important things (for retailers) is what are they doing now to insure they are in a liquid position."
But he said Black Friday is of less importance now than in the past, as customers are shopping closer to the Christmas holiday.
While the Thanksgiving weekend starts the shopping spree, it no longer is the busiest period of the season. Last year, the weekend accounted for 8.6 percent of holiday sales. The busiest period was the last week before Christmas, which accounted for 30.9 percent of holiday sales, according to the International Council of Shopping Centers.
"Consumers have a strong reason to procrastinate," Sanford Bernstein retail analyst Faye Landes told CNN Money Morning. "There will be more and more deals and bargains, and everybody knows it."
Even e-commerce, which started its holiday season more than a week ago, will probably be just ho-hum, dragged down by the slumping economy.
Click here for a look at retail stocks
Jupiter Media Metrix predicts a modest 11 percent gain to $11.9 billion in holiday online sales, down from a 50 percent jump last year. Already, Macys.com, Amazon.com (AMZN: up $0.28 to $9.08, Research, Estimates) and Brooksbrothers.com are aiming to jumpstart the season with special free-shipping promotions.
Rob Solomon, vice president and general manager of Yahoo! Shopping, said the portal is seeing huge momentum going into the holiday shopping season with transaction volume up nearly 100 percent over last year. 
from staff and wire reports
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