It’s not even Thanksgiving, but the nation’s retailers, including Wal-Mart and Toys “R” Us, are jump-starting holiday sales with big discounts and door buster specials starting Friday in what’s expected to be a lukewarm Christmas season.
The sales blitz — which comes three weeks earlier than the usual debut the day after Thanksgiving — is great news for consumers. But the new strategy shows the nervousness of merchants. Amid a deepening housing slump and higher food and energy costs, stores see the need to pull in shoppers as early as possible.
“This is clearly a win-win situation for consumers,” said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. But he added, “This isn’t good news for stores’ profits...It’s just more evidence that this is going to be a highly competitive season. Why would you start to drive traffic this early unless the retailing environment is not expected to be particularly strong?”
With Dec. 25 about eight weeks away, the retail industry is struggling with shoppers’ eroding confidence amid higher daily living expenses and problems in credit availability. And while Wednesday’s move by the Federal Reserve to cut a key interest rate by a quarter-point will make it cheaper to borrow money, economists say it may be too late to help the holiday season.
Wachovia Capital Markets LLC analyst John D. Morris said another big problem is that so far there aren’t any must-haves this holiday season. A year ago at this time, shoppers were in toy stores looking for the hard-to-find T.M.X. Elmo from Fisher-Price.
“There is nothing out there,” said Morris. “And so the marketing itself becomes the message.”
While many stores, including KB Toys Inc. and Circuit City Stores Inc., say the holiday sales events set for this weekend were planned months in advance, Perkins said the early discounting doesn’t bode well for the industry’s profit picture.
According to Perkins, third-quarter earnings growth is now expected to decline by 3.6 percent, down from a 7 percent gain in July. Fourth-quarter profits so far are slated to be up 5.9 percent, down from 10.9 percent as of July.
Major retailers like Target Corp. start to report their third-quarter results next week.
In recent years, merchants have been pushing the holiday season earlier and earlier, dangling free shipping and discounts. But this year, the discounts — coming only a few days after Halloween — resemble the post-Thanksgiving day blitz, with special door busters and 50 percent discounts as generous as those usually found on Black Friday. The day is so named because it was traditionally when stores became profitable.
Wal-Mart, which already announced price cuts early this month, announced Wednesday it will offer five major holiday specials, including a $348 laptop computer, starting on Friday at 8 a.m. The other four specials will be kept secret until Thursday when shoppers can see them online, though they can not purchase them. The discounts are being timed to the weekend’s launch of Wal-Mart’s new Christmas Shops.
On Friday, Toys “R” Us will be launching a two-day sale that will feature 100 discounted items. The doorbusters, which are available Friday from 5 p.m until closing and Saturday, 8 a.m. until noon, will including 50 percent price cuts on games, scooters and other items.
Circuit City, the nation’s second largest consumer electronics chain, is launching a sweepstakes marketing initiative, along with special deals on hot electronics.
Meanwhile, KB Toys will offer price cuts on this year’s popular new holiday toys as well as last year’s items. This year’s toys include Mattel Inc.’s Fisher-Price’s Smart Cycle, reduced to $89.99 from $109.99; and Play Along’s Hannah Montana Secret Backstage closet, reduced to $24.99 from $37.99.
“This is definitely a preview of Thanksgiving,” said Geoffrey Webb, director of advertising and sales promotion at KB. “We heard this is going to be a competitive holiday so we are going to be right in the rings fighting it out.”
