Holiday discounts: Few (besides Wal-Mart)

It's less than two weeks until Black Friday, but Penney, Kohl's, Best Buy and others aren't yet upping the ante against No. 1 retailer.

By Parija B. Kavilanz, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Wal-Mart, on a weekly basis, is hacking away at prices on holiday merchandise. But are its competitors following suit?

Not yet.

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On the contrary, industry analysts point out that the level of discounting this past weekend at retailers such as J.C. Penney, Kohl's (Charts), Sears (Charts), Best Buy and elsewhere looked "typical."

"Retailers aren't going to panic because of what Wal-Mart is doing," said industry expert George Whalin, CEO of Retail Management Consultants. "They already have their plans in place for the season and they want to stick to them."

Moreover, Whalin said retailers have made much better use of technology over the past few years to help manage inventory and design their merchandise assortment.

"If they have the right products, they won't need to flood the store with big sales," he said.

With two weeks to go until "Black Friday," the unofficial start of the holiday sales race on the day after Thanksgiving, department store operators on average are offering discounts of between 20 percent and 50 percent on categories such as clothing, footwear, home furnishing and jewelry.

At specialty stores, discounts are even leaner.

Wal-Mart (Charts), however, is the most aggressive it has been in years with holiday discounts.

The world's largest retailer embarked on a weekly pattern of widespread discounts on entire product categories. It has already cut prices on about 100 toys, electronics and, most recently, on more than 50 name-brand home appliances.

And it's promising more hot deals to come.

Some industry experts argue that Wal-Mart's slashing prices because it has to, not because it wants to.

The November-December sales months account for as much as 50 percent of merchants' annual profit and sales. Most retailers, including Wal-Mart, would much rather boost profit during that two-month period than chase volume.

The National Retail Federation (NRF), the industry's largest trade group, expects overall holiday sales will increase 5 percent this year, slower than last year's 6.1 percent increase.

Wal-Mart gambled two years ago when it decide not to offer big bargains on holiday merchandise in an effort to boost profit. It backfired. Many of its shoppers fled to competitors.

Given that it expects November sales at its stores open at least a week - a key retail measure known as same-store sales - to be flat on top of a disappointing October, Wal-Mart's clearly doing whatever it takes to pull shoppers into its stores in the coming weeks.

"With these weekly sales on big-ticket items like TVs and computers, Wal-Mart is training consumers to look for its ads first before anyone else," said Britt Beemer, retail analyst and chairman of America's Research Group.

While that strategy might pull shoppers into its stores, Whalin counters that "price" is Wal-Mart's biggest and perhaps only value proposition. Rival Target (Charts) and other merchants such as warehouse retailer Costco (Charts) compete on price as well as "style" and "brand assortment."

"These deep discounts will move sales but [Wal-Mart's] profits could get hammered," Whalin said.

Penney sitting pretty

J.C. Penney (Charts) and Nordstrom, two retailers on the opposite end of the retail spectrum, are are among the favorites to emerge as holiday winners.

Department store chain J.C. Penney appeals to low- to middle-income shoppers, while Nordstrom caters to a higher-income clientele.

Both these merchants have seen strong same-store sales heading into the all-important fourth quarter. Penney's sales jumped 8.1 percent in October, while Nordstrom logged a strong 10. 7 percent sales increase.

Analysts credit Nordstrom's success to its merchandise mix, especially its trendy and exclusive offerings in clothing and accessories, and superior customer experience.

In the case of Penney, its competitive edge also comes from a more fashion-forward clothing mix, more private-label merchandise and very good inventory planning.

"Nordstrom is completely immune from anything going on at Wal-Mart. Penney, depending on how severe the discounts become in the two to three weeks before Christmas, could feel the pinch in some categories like kitchen appliances and home furnishings," said Richard Hastings, chief retail analyst with Bernard Sands.

J.C. Penney, Sears and Nordstrom could not immediately be reached for comment.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.