Retailers Step Up Discounts to Attract More Shoppers

Retailers desperate to salvage sluggish holiday sales hope to lure the masses this weekend with red tags, special offers and reams of weekend-only coupons further discounting the discounted.

“This is like shopping D-Day,” said Todd Slater, a retail analyst with Lazard Freres & Co. in New York. “People will find themselves parking three towns away from the mall, the rush will be maddening and stores will be hard pressed to keep the shelves stocked.”

But crowds may not save Christmas for the retailers. Those deep discounts could mean lower profit margins.

“Many of the markdowns we’re seeing now would normally happen after Christmas, like Banana Republic’s cashmere sale,” Slater said. “And the markdowns are not only earlier but they’re deeper and on a wider assortment of products.”

Analysts have estimated that sales will grow only slightly this year compared with last year. Salomon Smith Barney has estimated a same-store sales gain of 3% for November and December this year, compared with 5.2% in 1999 and a three-year average of a 5.1% gain.

“It’s beginning to look a lot like clearance everywhere you go,” Salomon Smith Barney analyst Richard Church wrote in a memo to clients. “There is a lot of ground to make up for some chains and while volumes this week are large, it appears less likely that the chains can recover the lost ground.”

Just this week, retail giant Wal-Mart Stores Inc. said it will open 1,292 U.S. stores at 6 a.m. on Christmas Eve; Sears, Roebuck & Co. will extend its $10-off coupons for Saturday’s early shoppers; Kmart Corp. said its stores would stay open around the clock until Christmas Eve; and Home Depot Inc., the nation’s largest home-improvement chain, will offer 10% off almost everything.

In addition to the bargains, a quirky calendar will contribute to the weekend crush. A Monday Christmas means procrastinators have a full weekend for last-minute shopping. And holiday 2000 also features a late Hanukkah, which started Thursday evening and lasts eight nights.

Those extra days and late holidays encouraged people to put off their shopping. What’s more, bargain hunters have learned that substantial discounts come as the holiday draws closer.

The real damper on holiday sales, however, has been a slowing economy. Interest rate hikes, sky-high energy costs and a volatile stock market have encouraged consumers to watch spending more than retailers wanted or expected.

Uninspired sales do offer an upside to consumers, who can take advantage of the retailers’ special offers and sharp reductions. Those cuts have been so deep that some analysts have suggested that there’s little to be gained by waiting for the after-holiday sales.

The usual mad rush the day after Christmas probably will be relatively quiet, analysts predicted, since much of the merchandise already will be closed out and the sales begin on a Tuesday, when many would-be shoppers will be returning to work.