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Frantic Stores Slash Prices To Avoid Silent Nights

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By ANNE D'INNOCENZIO, The Associated Press

Published: December 22, 2007

NEW YORK - With just three days left before Christmas, the nation's retailers are in a lather to attract last-minute shoppers to salvage what has been a mediocre December.

Department-store operator Macy's Inc. has slashed prices on everything from clothing to jewelry, while Toys R Us is offering price cuts of up to 75 percent this weekend. At stake are retailers' profits for the year and perhaps the strength of the economy.

Although consumers jammed stores at the start of the season for big discounts and shopped early for Nintendo's hard-to-find Wii game console, popular video games such as "Guitar Hero III: Legends of Rock" and Australian sheepskin UGG boots, they waited until the end for most everything else, to take advantage of the best deals amid a challenging economy.

The biggest disappointment comes from women's apparel, extending a downturn that's grown deeper in recent months and serving as an ominous sign for the health of retailing in general. Women do the primary shopping for the family, so analysts say it's troubling that they are spending less time in the stores.

"There's been a malaise" within women's clothing sales and "it has spread to other areas," said Dan Hess, chief executive of Merchant Forecast, a New York-based research firm. "The panic button has been pushed, particularly in department stores."

And even with an expected sales surge this weekend, which traditionally accounts for about 10 percent of holiday sales, Lazard Capital Markets analyst Todd Slater expects that the last-minute spending will be "too little, too late" to save Christmas.

"When people think they are in a recession, they spend like they are in a recession," Slater said.

A series of snowstorms hampered spending in recent days, but clearly, economic worries - particularly higher gas prices, an escalating credit crisis and a slumping housing market - weighed on shoppers' minds.

According to ShopperTrak RCT Corp., a research company that tracks total sales at more than 50,000 retail outlets, business for the week ended Dec. 15 slipped 0.4 percent compared to the same week in 2006. Total U.S. traffic for the same period slumped 8.9 percent from a year ago.

The apparel market was hit even harder because there was nothing new that wowed shoppers. The new style - cropped jackets with bell sleeves - failed to generate buzz, says research analyst Jennifer Black.

Hess estimated that discounts at department stores are about 10 percent to 15 percent higher than a year ago, a worrisome sign for profits.

Slater estimates large department stores are missing sales plans by as much as 10 percent in December.

Slater noted that even gift card sales have been disappointing; in some cases, the gift card business may be "even down," based on spot checks with retailers. Gift card sales have been a bright spot in recent years though they mute pre-Christmas business because sales are not recorded until recipients redeem them.

Online retailers, which have had an uneven season, are ending with a strong finish. According to ComScore, consumers spent almost $25 billion online from Nov. 1 through Dec. 18, a 19 percent increase over 2006, though below its 20 percent forecast.

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