Holiday shopping off to higher start

Reports show Black Friday gains, but caution that key retail season may still end up weak.

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By Parija B. Kavilanz, CNNMoney.com senior writer

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The Nike outlet in Woodburn Company Stores in Woodburn, Ore., opened its doors to shoppers on Thanksgiving Day.
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Shoppers rush to grab hot deals on electronics like flatpanel TVs and Blu-Ray players at Wal-Mart.

NEW YORK (CNNMoney.com) -- Stores and online merchants were busier this weekend than they were a year ago, according to figures out Sunday, but signs persist that holiday shopping will suffer in the weakest economic climate in decades.

The National Retail Federation (NRF), an industry trade group, said shoppers spent $41 billion in the 4-day Thanksgiving weekend. The average shopper spent $372.57, up 7.2% from the $347.55 spent last year.

"Pent-up demand on electronics and clothing, plus unparalleled bargains on this season's hottest items helped drive shopping all weekend," said NRF President and CEO Tracy Mullin, in a statement. "Holiday sales are not expected to continue at this brisk pace, but it is encouraging that Americans seem excited to go shopping again."

To underscore its caution, the NRF reiterated its forecast that 2008 holiday spending will rise just 2.2%, to $470.4 billion, the smallest gain in six years.

The weak economy was also reflected in the fact that more than half of shoppers, 54.7%, went to discount stores such as Wal-Mart, according to the NRF. Department stores were visited by 43% of shoppers, up from last year, while 36% visited specialty stores and 34% shopped online.

Another indication of the economy's impact: the NRF said that of the 73.6 million people who shopped in stores and online Friday, 23.3% were at it before 5 a.m., when many merchants offered huge discounts on selected items. More than half of shoppers, 57.6%, were in stores and online by 9 a.m.

Online, initial results showed a 2% gain in combined Thanksgiving Day-Black Friday sales from last year, according to figures from research firm comScore released Sunday.

The firm said sales were up 6% on Thanksgiving, to $288 million, while sales rose 1% on Friday to $534 million.

Underscoring how difficult the economic climate is, comScore said online sales for the first 28 days of November - the start of the two-month holiday season - were down 4% to $10.4 billion.

The big online shopping day is expected to be Monday, or "Cyber Monday." NRF said it expects 84.6 million adults to shop online from either home or work, up from 72 million last year.

"Online retailers have been planning their Cyber Monday promotions for months and are eagerly waiting to debut these deals to shoppers," said Scott Silverman, executive director of Shop.org, an online division of NRF. "Many people who didn't want to fight the crowds or get up early to stand in line over the weekend have been waiting until Cyber Monday to start their holiday shopping."

ShopperTrak RCT, a retail industry research firm, said Saturday that total Black Friday sales rose 3% this year, to about $10.6 billion nationwide.

Bill Martin, the firm's co-founder, said that given the headwinds facing the nation's merchants - a troubled economy, the traditional weakness in a presidential election year and the aftermath of the summer's record gas prices - the first day was pretty positive.

"Under these circumstances, to start off the season in this fashion is truly amazing and is a testament to the resiliency of the American consumer, and undeniably proves a willingness to spend," Martin said in a statement.

He credited deep discounting for a lot of the sales increases, which were fairly consistent across the nation - up 3.4% in the South, 3% in the Midwest, 2.7% in the West and 2.6% in the Northeast.

"While this is an encouraging start for retailers, there's no guarantee these deep discounts will continue after Black Friday weekend, which could slow spending," said Martin. "Additionally, consumers have just 27 days to shop this year as opposed to 32 in 2007, which may catch some procrastinating consumers off guard, leading to lower sales levels."

Scenes from Black Friday 2008

Taubman Centers (TCO), which operates 24 shopping centers in 11 states, said transactions at its facilities were slightly higher than last year on average.

Among Taubman's facilities are the Beverly Center in Los Angeles, Woodfield Mall outside Chicago, and the Stamford Town Center in Connecticut.

Taubman said electronics, apparel and moderately priced jewelry appeared to be the big sellers at its stores, with several malls specifically reporting demand for women's Ugg boots.

Jittery analysts

Going into the holiday weekend, analysts were not optimistic, even with indications of strong initial Black Friday crowds.

"Shoppers definitely have a mission this year," said Marshal Cohen, chief retail analyst for NPD Group. "They are serious about finding the best deals. They are very budget conscious, they've done their research and then they'll go home."

Cohen projects a 3% drop, his first-ever decline forecast, in total holiday sales. Another analyst, America's Research Group chairman Britt Beemer, estimates sales for November and December combined will slip 1%.

"[Shoppers] know exactly what they want, where to shop for it and who has the best deals," said Beemer, who 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 during the Thanksgiving weekend.

Department store operator J.C. Penney (JCP, Fortune 500) said Saturday it will not issue any Black Friday or full weekend sales results, waiting instead until it puts out its November sales report on Thursday.

"In light of the challenging and volatile economic climate, and shifts in this year's retail calendar, we don't believe that reporting sales data for any one day (or weekend), including Black Friday, would provide a meaningful barometer of our business," the company said in a statement.

Early start

Stores opened early on Black Friday - in fact, some were even open on Thanksgiving itself - as retailers tried to ignite the holiday shopping period, which 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.

"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.

What's more, a record slump in consumer spending has already forced leading store chains such as Circuit City and Sharper Image into bankruptcy.

Cold shoppers seek hot toy deals

The season got off to a tragic start with fatal incidents in New York and California.

Police said that a 34 year-old temporary employee was trampled to death at the opening of a Wal-Mart store in Valley Stream, N.Y. In Palm Desert, Calif., police said two men were shot to death at a Toys R Us store. (more on Black Friday violence)

NPD's Cohen said the two incidents would have little impact on shopping.

"Both incidents are terrible and could have a bit of residual effect, where some more people might migrate their holiday shopping online," he said. "But even if it affects 4% of holiday shoppers [this year] that's still an aggressive estimate." To top of page

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