Holiday sales will start early

Published: Thursday, November 1, 2007 at 6:01 a.m.
Last Modified: Wednesday, October 31, 2007 at 9:08 p.m.

NEW YORK - 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.

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