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Brutal Christmas for stores
Late rush unlikely to rescue retailers from the worst holiday season in 30 years.
December 26, 2002: 7:19 PM EST
By Steven Radwell and Chris Isidore, CNN/Money Staff Writers

NEW YORK (CNN/Money) - Procrastinators, dust off your credit cards.

That was the mantra for millions of Americans Thursday as they streamed into malls and stores across the country, hunting for the marked-down items that retailers can't wait to get rid of after what looks like the worst holiday shopping season in at least 30 years.

The latest figures certainly don't look good. Holiday shopping fell 11 percent to $113 billion between Thanksgiving and Christmas, according to estimates released Thursday by ShopperTrak, which tracks retail sales.

Retailers are discounting to clear shelves after the worst holiday season in at least 30 years.

But the comparison isn't fair since there were six fewer shopping days between the two holidays this year than there were in 2001. Still, the shorter holiday shopping period was only one factor contributing to the decline.

"Clearly the economy is not helping," said retail analyst Todd Slater at the brokerage house Lazard Feres in New York. "Consumers are relatively strapped, and they're focusing more of their time and attention on the big discount days, like black Friday (the day after Thanksgiving) and today."

With a disappointing season so far, merchants will be counting even more on the post-Christmas rush, which traditionally accounts for about 10 percent of total holiday sales, according to the International Council of Shopping Centers.

Careful spenders

Retailers have been resorting to extra-heavy discounting this year, but they've been faced with the likes of Alexander Knysh, a professor at the University of Michigan who was shopping at Macy's in New York on the day after Christmas.

Knysh said he and his wife cut their holiday shopping by half this year, mostly because of the economy. "We're expecting across-the-board cuts at the university," he said, and while his job is secure since he has tenure, his wife is unemployed.

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CNNfn's Rhonda Schaffler takes a look at the disappointing holiday retail season with A.G Edwards Bob Buchanan.

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That's a hard argument for retailers to counter. Burt Flickinger, managing director of the consulting firm Reach Marketing, said the heavy discounting from merchants won't change retailers' fortunes. "No matter what the stores do, they still seem to not be able to stimulate spending," he told the Associated Press.

Still, those who waited are seeing some attractive discounts. Knysh said he bought a sport coat at Macy's for $99 that would have cost $140 or more before the holiday.

"For consumers, it's a good time," said Lazard's Slater. "Procrastinators will be rewarded."

A sign of the times?

Wal-Mart Stores, the world's largest retailer, said Thursday its sales will be weaker than it had expected despite a strong last-minute sales rush before Christmas. The company said sales at stores open at least a year, a closely watched retail measure known as same-store sales, will be up 2 to 3 percent, rather than its previous forecast for a 3-to-5 percent gain.

Wal-Mart (WMT: Research, Estimates) is so much larger and more successful than other general retailers that the new guidance left analysts believing the industry overall will report almost no rise in same-store sales.

"It's certainly disappointing by any measure," said Bob Buchanan, retail analyst at A.G. Edwards, on CNNfn's Market Call. "I think the industry is going to be close to flat, with a zero- to-1 percent rise. Coming in, we thought the month would be up 2 to 3 percent."

"Federated (Department Stores) was below plan. Target was well below plan," said Buchanan. "We have enough data to know the month was not good."

Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi, expects same-store sales will be up only 1.5 percent for November and December, below his already reduced forecast of 2 percent and the weakest increase since the same-store index started tracking the data in 1970.

Delos Smith, an economist with the Conference Board, a business research group in New York, said worries about rising unemployment and a possible war with Iraq caused consumers to pull back this season. He therefore doesn't expect a rebound in spending anytime soon.

"People are nervous and nervous people are not great shoppers," Smith said.

Some companies report strong sales

Some glimmers of good news were evident, however. OfficeMax Inc. (OMX: Research, Estimates), the nation's No. 3 office supply retailer behind Office Depot and Staples, said same-store sales jumped 10 percent for the 26 days between Thanksgiving and Christmas, meeting the company's expectations for the period.

It said the holiday sales period was its best in three years, citing strong sales of digital cameras, machines that allow users to print, fax, scan and copy using one product, and a computer drive that lets you burn digital video discs (DVDs).

Online retailer (AMZN: Research, Estimates) reported its busiest holiday shopping season ever, although since it defined the holiday season as Nov. 1 to Dec. 23, it was unclear if it got hurt by the shorter-than-normal shopping season. Amazon also did not give dollar sales figures, instead reporting 56 million items were ordered during its holiday shopping period.

Some observers said that despite weak sales, many retailers kept inventories fairly lean going into the holiday season, meaning profits won't be under quite as much pressure.

"I think the retailers are going to come out OK," said Slater. "It's not going to be 'Nightmare on Elm Street.'"  Top of page

-- from staff and wire reports

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