News > Jobs & Economy
    SAVE   |   EMAIL   |   PRINT   |   RSS  
Pre-Black Friday static
Wal-Mart's gung ho, Target's not. Some retailers are slashing prices early. Others aren't.
November 23, 2005: 8:53 AM EST
By Parija Bhatnagar, CNN/Money staff writer
Photo GallerylaunchSee more photos

NEW YORK (CNNMoney) - As Black Friday goes, so goes the entire holiday shopping season, right?

Not always.

"Black Friday is a good harbinger, but not a guarantee for how the holiday season fares overall," said Ken Perkins, retail analyst and president of research firm Retail Metrics.

Even if retailers record blockbuster post-Thanksgiving sales this year, industry watchers are concerned that the momentum may not hold all the way to Christmas because of some mixed signals coming from retailers themselves.

While Wal-Mart (Research) CEO Lee Scott said earlier this week he is confident his stores "will have a good holiday season," rival Target (Research) shocked everyone by warning of a blue Christmas -- even though its sales at stores open at least a year have outperformed Wal-Mart's for the past 18 months. Meanwhile, J.C. Penney (Research) said it is "cautiously optimistic" about its holiday outlook.

"It's going to be a cat-and-mouse game," Perkins said. "Because of the crosscurrents confronting consumers, retailers with the right merchandise at the right price will do well. If Black Friday is lousy, that will certainly send jitters through the industry and the markets."

There certainly were jitters at Wal-Mart after Black Friday 2004. The No. 1 retailer has made no secret of the fact that it will wage an aggressive battle on prices to erase last year's blunder, when it lost crucial post-Thanksgiving sales in 2004 because it skimped on the deep discounts in favor of boosting profits.

The retailer will "officially" debut its Black Friday specials early next week, but Web blogs that claim to have seen the circulars tell of big discounts on such items as computers, electronics and toys.

Wal-Mart isn't likely to be alone in its discounting ways when the sales circulars hit homes by Thanksgiving Day.

"It will be a challenging holiday season for most retailers," Ernst & Young retail analyst Jay McIntosh said in a report. "To bolster traffic and sales, retailers will begin promoting earlier in the season and promote more frequently and aggressively than originally planned."

To his point, department store chains have slashed prices much earlier than usual in a frantic bid to draw bargain-hungry shoppers and their crucial holiday dollars.

George Whalin, an independent retail analyst, said the pick-up in early promotions suggests nervousness on the part of retailers about consumers' spending ability stretching all the way through the festive season.

There are some exceptions, however. Specialty chains and high-end sellers such as Chico's (Research) and Nordstrom (Research) are holding off on the early sales.

"These retailers sell stuff that is unique to them," Craig Johnson, president of retail consulting group Customer Growth Partners. "They don't have to worry about brand loyalty. People continue to shop there even if they don't get big sales on things that they really want."

So why is it Black Friday?

The day after Thanksgiving is dubbed "Black Friday" since it traditionally marks the start of the holiday shopping season, the period when retailers finally move out of the red -- indicating losses -- for the year and into the black, or profitability.

It's also one of the busiest shopping days of the year, second usually to the Saturday before Christmas.

The National Retail Federation (NRF), the industry's largest trade group, expects its measure of total sales for the November-December shopping period to grow 6 percent to $439.5 billion, softer than last year's 6.7 percent increase.

Retailers can earn as much as 50 percent of their annual sales and profits just in those two months combined.

"A combination of many factors, including energy prices, the job market, disposable income, and consumer confidence will ultimately affect retailers' sales this holiday season,'' NRF's chief economist Rosalind Wells, said in the group's annual holiday sales outlook.

Other forecasts indicate a good but not great season overall.

Michael Niemira, chief economist with the International Council of Shopping Centers (ICSC), expects same-store sales for the two key holiday months together will increase between 3 and 3.5 percent. Ernst & Young's McIntosh sees a 6 to 7 percent gain in his broad measure of sales, compared with an 8.3 percent gain at the end of 2004.

Despite the anticipated price-cutting, Retail Metrics' Perkins believes retailers could still log decent profits. "Inventories have been very tightly controlled all year. If products are selling well, there's less pressure to further reduce prices later on."

Similar to last year, the best deals will be on clothing and consumer electronics, he said, with bargain hunters best off by shopping online.

Bills, bills, bills

As gasoline prices have retreated to pre-Katrina levels, home heating bills have emerged as the primary risk to holiday spending, said Candace Corlett, retail analyst and partner with WSL Strategic Retail.

"It's directly related to the first cold snap," she said. "We haven't felt it yet in the Northeast, but people will rethink how much they want to spend if the weather turns colder and the home heating costs jump."

She's already seeing red flags from results of the firm's latest bi-weekly "How America Shops" report, which analyzes and predicts shopping behavior based on a survey of 2,000 consumers.

The survey showed 53 percent of shoppers said they will spend less on holiday-related purchases compared with last year. "This is a huge increase from last year, when 29 percent said they would pull back on holiday spending," Corlett said.

The cautious tone appears to be climbing up the income ladder, too, with 47 percent of those consumers with incomes of $100,000 or more saying they are planning to spend less this year.

"Consumers' wallets are stretched. That's obvious," Corlett said. If the spending mood sours further, there's a danger that shoppers may not make return trips to malls once they wrap up their gift purchases.

Said Corlett. "There's plenty of uncertainty out there. This is not a very predictable season at all."


Free breakfast and a wake-up call on Black Friday? Click here for more.

Wal-Mart's Black Friday deals revealed? Click here for more.  Top of page

Follow the news that matters to you. Create your own alert to be notified on topics you're interested in.

Or, visit Popular Alerts for suggestions.
Manage alerts | What is this?