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The Honolulu Advertiser

Posted on: Monday, December 2, 2002

Holiday retail sales start off strong

By Leslie Earnest
Los Angeles Times

Bombarding shoppers with bargains apparently worked in pumping up sales for U.S. retailers, who posted a better-than-expected start to the holiday shopping season, analysts said yesterday.

Yet, it was far from clear whether U.S. retail sales will end up stronger this year, or fizzle as December unfolds. Some analysts worry that with shoppers increasingly intent on snagging bargains, there is a risk that prices will have to fall even lower to keep them motivated.

"Once you start how do you stop?" said Barbara Johnson, managing partner at ShopperTrak RCT, which released estimates of national retail sales yesterday. "They've got to hit with bigger discounts as they get deeper into the season. If you start with a big discount, where are you going to end?"

The risk is that shoppers begin seeing the lower price as the norm, Johnson said, a phenomenon that is already occurring, especially among apparel and electronics retailers.

"I think right now they're doing whatever they can to get the consumer to buy," she said.

It apparently worked during the weekend.

Sales jumped 12.3 percent on Friday and 9 percent on Saturday, compared with 2001, according to ShopperTrak's estimates, which are derived from U.S. Commerce Department sales data. Overall, estimated sales for the two days was $12.6 billion, up 11 percent from last year.

A separate survey of 7,000 consumers by the National Retail Federation, the nation's top retail trade group, found that 75 percent of the nation's consumers went shopping during the weekend, spurred by a shorter shopping season between Thanksgiving and Christmas and heavy promotions of on-sale merchandise.

"What we're seeing is basically a strong start, one that I think really does increase the confidence level that we can do relatively well this holiday season," said economist Michael Niemira. But retailers "might have pulled forward some sales that might have come over the next week or two or three. That's the worry."

The holiday shopping season between Thanksgiving and Christmas typically accounts for about a quarter of U.S. retailers' sales.

Discount retailers, which used sharp markdowns on everything from 27-inch televisions, diamond jewelry and Barbie dolls to lure shoppers on Friday, were clearly the early winners.

Wal-Mart Stores Inc., the world's largest retailer, said its sales hit a one-day record of $1.43 billion on Friday, a 14 percent jump over the day after Thanksgiving last year.

Retail experts had expected a particularly frantic dash to stores at the start of this holiday season, since it includes only four weekends this year, instead of five. They surmised that shoppers would panic about the dwindling days until Christmas.

But shoppers are making headway, according to the retail trade group's survey, which showed that the average consumers had completed almost 40 percent of their shopping by Saturday. For all of November and December, the National Retail Federation has predicted holiday sales will rise 4 percent this year over last, which would be the smallest increase in five years.

Comparisons with last year are difficult to evaluate since some retail experts believe shoppers then were still stunned by the Sept. 11 terrorist attacks. On the day after Thanksgiving last year, sales nudged up just 2.7 percent, compared with an 11.1 percent increase in 2000, but consumers picked up the pace last December as desperate retailers slashed prices.

While an uncertain economy and employment concerns could hamper sales this year, Michael Baker, an economist with the International Council of Shopping Centers, said disposable income is up about 3.9 percent, compared with 2001. He said the wave of refinancing has allowed people to turn home equity into cash, or at least reduce their mortgage payments.

"We know there are resources out there for consumers to draw on in terms of spending power," he said.

Nonetheless, Baker did not boost his November-December sales projections, even after Friday's onslaught of shoppers. That is because consumers are still grappling with so much uncertainty about a lack of employment growth, terrorism concerns and the prospect that a war could pull the nation back into recession.