By Beth Jinks and Allison Abell Schwartz
Nov. 29 (Bloomberg) -- U.S. retailers that lowered prices as much as 70 percent on the day after Thanksgiving may see sales eroded by steeper price cuts in what may be the worst holiday shopping season in six years.
Bargains such as Best Buy Co.’s Toshiba Corp. satellite laptop computer for $379.99, a $270 discount, and Gap Inc.’s buy-one-get-one free holiday sweater offer may leave retailers with slowing sales even as they entice more people to visit stores during the holidays.
Retailers are looking for year-end demand to make up for stagnating sales and waning consumer confidence. The holiday months might account for a third or more of stores’ annual profit, and consumer spending makes up more than two-thirds of the U.S. economy, which is falling deeper into a recession.
“The consumer is scared out of their wits and they’re just going to spend less,” Howard Davidowitz, chairman of retail consultant Davidowitz & Associates in New York, said yesterday. “The consumer is now saying ‘Unless something sells at a certain price, I’m done.’”
Individuals may spend an average of $616 on holiday gifts this year, down 29 percent from a year earlier, according to a Gallup Inc. poll.
Retailers promoted “doorbuster” deals to attract customers on the Friday after Thanksgiving, said to be when retailers started to make their annual profit.
One Dead
A worker was trampled by customers and killed yesterday at a Wal-Mart Stores Inc. location in Long Island, New York, according to local police and the company. At least four shoppers were hurt at the store in Valley Stream, located about 13 miles (20 kilometers) from New York City, Nassau County Police said in a statement.
November and December sales at stores open at least a year may rise 1 percent, the smallest gain since 2002, according to the International Council of Shopping Centers, a New York-based trade group.
Retailers used lower prices at earlier hours to win customers that were starting their holiday shopping with less than four weeks before Christmas.
Kohl’s Corp., the fourth-largest U.S. department store, opened at 4 a.m. Wal-Mart and Macy’s Inc. had a 5 a.m. start. Gap opened some locations on Thanksgiving Day.
Wal-Mart, based in Bentonville, Arkansas, has bucked the trend, with its emphasis on low prices winning customers during the economic slump. The retailer is the only Dow Jones Industrial Average company to have risen this year. It’s gained 18 percent, while the 30-member index has tumbled 33 percent.
Black Friday
Discounts on the Friday after Thanksgiving, called Black Friday, pulled in consumers who felt the pinch of the economic slump and higher fuel prices earlier this year.
Crowds at the Woodfield Mall in Schaumburg, Illinois, today “gives me optimism that that the 2 percent growth I’m forecasting can be reached” during the holiday period, Jay McIntosh, president of Consumer Foresight LLC, a Chicago-based consulting firm, said today in a Bloomberg Television interview.
Under-30 adults, who may not have been hurt as much as older consumers by stock-market declines, were out shopping, McIntosh said.
“Virtually every store I walked by was crowded,” McIntosh said. “The small specialty retail stores were crowded. Last year, they weren’t.”
Malls operated by Taubman Centers Inc. saw a similar presence of young shoppers, spokeswoman Karen Mac Donald said.
The Fairlane Town Center mall in Dearborn, Michigan, had more early and younger shoppers this year, Mac Donald said in an e- mail. About 75 lined up at the Aeropostale location by 4:30 a.m.
Richard Simmons
Fitness personality Richard Simmons, wearing red-and-white- striped very short shorts, sneakers and a red muscle shirt with fluffy white Santa trim, bounced around the outside of Macy’s in New York’s Herald Square early yesterday morning, where crowds mobbed every entrance in advance of its opening.
Richard Feijoo, 21, and his twin brother Jesus from Brooklyn were waiting at the front of the line at Herald Square and were shopping for themselves.
“It’s low prices, a good store and it’s Black Friday, so we’re here early,” Richard said. “Jeans, Levi’s, only clothes. I go shopping at Macy’s in Brooklyn so I know exactly what I’m looking for.
There were 5,000 people waiting to get in, Macy’s Chief Executive Officer Terry Lundgren said in a Bloomberg Television interview.
“A lot of folks are walking out with bags,” Lundgren said. “We got them in with great values, and what I really hoped is that they will spend more of whatever they’re going to spend at Macy’s, even if it’s less than last year.”
Less Spending
Americans cut spending by 1 percent last month, the biggest decline since the 2001 recession. After adjusting for inflation, spending was down for the fifth straight month, the longest streak since 1990-1991, according to Commerce Department data.
Toys “R” Us Inc., the largest U.S. toy-store chain, is putting “very aggressive” promotions in place to draw in shoppers, Chief Executive Officer Gerald Storch said in an interview.
“We know that value is very important in this economic situation and we’re determined to be aggressive throughout the holiday season in offering that value,” Storch said in a telephone interview.
To contact the reporter on this story: Amy Eagleburger in New York aeagleburger@bloomberg.net; Beth Jinks in New York at bjinks1@bloomberg.net
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