Stores keep their fingers crossed
Crowds turn out early on Black Friday, but analysts question whether there will be any follow through as key holiday shopping period begins.
NEW YORK (CNNMoney.com) -- Black Friday appeared to start strong this year, but analysts warned that the robust start to the critical holiday shopping period could fade as the weekend progressed.
"[Shoppers] know exactly what they want, where to shop for it and who has the best deals," said Britt Beemer, retail analyst and chairman of America's Research Group.
Based on this trend, the big difference this year from years past is that Beemer doesn't expect people will deviate from their shopping lists.
That's a problem for merchants who depend just as much on the impulse buy as they do on consumers' shopping lists to get them off to a flying start on Black Friday.
"I talked to a number of people standing in line in stores today. All had lists. And the lists had no more than three items," Beemer said. "The real question is whether there'll be anyone left [in stores] by midday."
The holiday excitement took a tragic turn at a Wal-Mart in Valley Stream, N.Y.
Police confirmed that a 34 year-old temporary employee was trampled to death at the opening of the store in the New York suburbs. A pregnant woman was taken to a hospital for observation.
""Our thoughts and prayers go out to the families of those impacted," Hank Mullany, Wal-Mart's president for the Northeast, said in a statement. He said the company is cooperating with a police investigation into the incident. (more on Black Friday violence)
With a weak economy in the background, bargain hunters gathered to snag special deals from anxious merchants who opened stores as early as 12:01 a.m.
Some malls reported higher traffic in the morning hours this year compared to last year.
At Atlanta's Lenox Square mall, the parking lot was 30% full by 5:30 a.m. with an estimated 2,000 shoppers.
"There were lots of bags from Macy's and other retailers indicating shoppers are purchasing more merchandise this year," said Les Morris, spokesman for Simon Property Group. the nation's largest mall operator.
Lori Johnson, mother of three, came to Toys R Us at the Rockaway Townsquare Mall in New Jersey shortly after 5 a.m., straight from her bartending job.
"It's Black Friday. You have to shop on Black Friday," Johnson said, hands filled with shopping bags. "As long as I still have money, I'll last."
Johnson and her sister, Tammy Bohn, purchased video games for 50% off.
The early reports of big crowds looked positive to retailers because the holiday shopping period, which unofficially kicked off Friday, can account for as much as 50% or more of sellers' annual profits and sales. The day is dubbed "Black Friday" because of its importance in determining a store's profitability for the year.
Most merchants have had an extremely difficult sales year as Americans seriously retrenched on their shopping habits in light of a worsening economy.
What's more, a record slump in consumer spending has already forced leading store chains such as Circuit City and Sharper Image into bankruptcy. Given this scenario, the National Retail Federation (NRF) forecast holiday sales to rise just 2.2% this year, which would make it the weakest sales gain in six years.
But despite what looked like a robust start for retailers, NPD Group's chief retail analyst Marshal Cohen said he estimates that the lines of early-bird shoppers seemed 20% less than last year.
Cohen, too, cautioned that the early buying frenzy could peter out by 10 a.m., or once the doorbuster deals that are only offered for a few hours were over.
"Shoppers definitely have a mission this year," Cohen said. "They are serious about finding the best deals. They are very budget conscious, they've done their research and then they'll go home."
Both Beemer and Cohen project a first-ever decline in total holiday sales. Cohen forecasts a 3% drop while Beemer estimates sales for November and December combined will slip 1%.
However, there was pent-up demand for some items. Consumers were flocking to hot deals on electronics. A Best Buy (BBY, Fortune 500) store in Paterson, N.J., had a long line of people waiting from as early as 8 p.m. on Thanksgiving Day, according to Chuck O'Donnell, Best Buy's district services manager for New Jersey.
"We're bringing people into the store in waves. There are just so many of them," O'Donnell said, adding that most of the shoppers were eager to pick up deals on laptops, digital cameras and iPods.
O'Donnell said he expected flat-panel TV shoppers to come later in the day.
Flatscreen TVs, Blu-Ray players, vacuum cleaners and toys were selling fast at a Wal-Mart (WMT, Fortune 500) store at Fairfax, Va. Industry watchers expect the No. 1 retailer to emerge as a big winner by Christmas because of its value prices.
The hottest items at the Rockingham Park Mall in Salem, N.H., were Nintendo's Wii Fit and Guitar Hero videogames.
Lines snaked around the block at Toys R Us' flagship store in New York's Times Square before its 5 a.m. open.
"I didn't think it would be this [crowded], with the economy the way it was, but I guess Toys 'R' Us was offering the best deals, so this is where everyone came," said shopper Nicole Williams, 29, of New York City at the toy merchant's flagship store in Times Square.
Gerald Storch, CEO of Toys R Us, said people were in line at 9 p.m. Thursday outside the Times Square store.
"I am excited and optimistic about today and the rest of the holiday season," Storch said.
One interesting trend, Storch pointed out, was that shoppers weren't necessarily buying lower-priced toys. Storch said some of the fastest-selling toys in the first hour after the store opened were the $60 Elmo Live and the $139.99 Spike the Ultra Dinosaur from Fisher-Price.
"I'm not that surprised that parents are spending money on their kids, and they want to buy a good, quality toy," he said. "Parents tell us that they will cut back on themselves, but not on Christmas gifts for their kids."
The J.C. Penney store at the Columbia Mall in Grand Forks, N.D., was packed as early as 4 a.m. Penney's customers were bagging bargains on home products and winter clothing.
Penney announced that its Black Friday sale this year will have "the most compelling Black Friday prices ever offered in the Company's history" with more than 400 categories of products featuring deep discounts.
"Given the current economic environment, [the company] understands the issues facing our customers, and we are committed to offering the season's most affordable gifts," said Ken Hicks, president and chief merchandising officer for J.C. Penney.
However, retail analysts say merchants have to keep the shopping momentum alive not just on Friday but over the weekend as well.
This will be a real challenge. While consumers are cutting back on how much they spend on gifts, the NRF estimates that Black Friday and the Thanksgiving weekend will also likely see fewer Americans hitting stores.
The trade group said about 128 million people will commence their gift buying this Friday, Saturday or Sunday after Thanksgiving, down from 135 million last year.
Some retailers didn't bother waiting until Black Friday to jumpstart their holiday sales. The Nike store at the Woodburn Company Stores in Woodburn, Ore., opened its doors at 8:45 p.m. Thursday.
"Nike had a line that wrapped across the front of the center and past five other stores," said Kristy Kummer, marketing director for Woodburn Company Stores.
Still, Beemer remained unconvinced that retailers will see a decent start to the holiday season. "It will be a disappointment," he said.