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Retailers Hope To Prosper With Deals, Discounts

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By ANNE D'INNOCENZIO, The Associated Press

Published: December 7, 2007

NEW YORK - One of the clearest signs that retailers are nervous this holiday season is likely to be found at Wal-Mart stores this weekend: stacks of Webkinz.

The fiercely popular Webkinz, plush toys that children collect and use the Internet to interact with, until recently were only sold in gift shops and other independent retailers. But Wal-Mart Stores scored a limited-time deal to sell Webkinz, hoping the cute little animals will draw shoppers and give the world's largest retailer a respectable season.

A difficult retail environment - evidenced by mixed sales reports retailers released Thursday - has other merchants straining to come up with come-ons and promotions.

If the exclusives and special deals don't work, stores planning big discounts between now and Dec. 25 will find themselves having to slash prices even more heavily - and possibly see their profits falter along the way.

Thursday's reports showed that retailers had a solid Thanksgiving weekend but business has dropped off even more than normal in the days since. Target Corp. warned that it may not meet its earnings-per-share growth goal for the fourth quarter if sales don't improve significantly.

The "consumer splurged on Black Friday and then she was spent," said Wachovia Capital Markets LLC analyst John D. Morris. "The question is, when will she resurface?"

The bulk of holiday shopping has come later and later in recent years, with the 10 days before Christmas the most critical for retailers. But there are often many signs between Thanksgiving and that final run-up to the holiday that tell retailers how strong sales are likely to be. If the low spending continues, many retailers are likely to cut prices further.

November's results showed that high-end shoppers were comfortable splurging, while middle and lower-income shoppers, unsure about their finances amid rising energy prices and ongoing housing problems, tried to spend as little as possible and looked for big discounts. The trend benefited warehouse club operators such as Costco Wholesale Corp. and luxury stores such as Saks.

Wal-Mart posted a modest sales increase, helped by strong sales of pharmaceuticals and groceries, but mall-based apparel stores, including Limited Brands, reported sluggish sales.

Many department stores, including Macy's, reported robust sales, but that was mostly because of a quirk in the calendar that resulted in an additional week after Thanksgiving falling into the month of November. The concern is that when November's and December's sales are looked at together, the critically important holiday shopping season will be a disappointment.

The UBS-International Council of Shopping Centers tally of 43 retailers posted a 3.5 percent gain in same-store sales in November. But excluding the calendar shift, said Michael P. Niemira, chief economist, the tally would have been up 2.5 percent. The tally is based on sales at stores open at least a year, and are considered the key reason for a retailer's health.

"In many respects, it is the same story, and the worries are the same," Niemira said.

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