US retailers may face a bleak Xmas as shoppers stay away from stores

08 Dec 2007

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US retailers may have to struggle to increase sales this festive month. Consumers hit by falling home equity and higher food and energy costs are likely to avoid buying full-priced goods as Christmas presents this year.

It is now clear that retailers may be forced to cut prices further during what the National Retail Federation (NRF) has said will be the slowest holiday shopping season in five years.

Consumers grappling to avoid mortgage defaults and hit by higher costs for milk and gasoline may wait until much closer to Christmas to spend, hoping for discounts of 50 per cent or more on clothing and electronics.

Second-largest US discount chain Target said on Friday 7 December that its sales need to “meaningfully improve” in December, if it has to achieve fourth-quarter profit growth. JC Penney, the third-biggest department-store chain, expects sales at its stores to fall for the next five weeks, till 5 January.

The NRF projects November and December sales will rise 4 per cent, the smallest gain since 2002. That year, sales added just 1.3 per cent. The 30-scrip Standard & Poor''s 500 retailing index is down 11 per cent this year.

Despite the crowds and the hoopla, shoppers actually spent 3.5 per cent less per person over this year’s Thanksgiving weekend than in 2006, the NRF reported. Black Friday, the day after Thanksgiving, is considered the unofficial start to the holiday shopping season and is one of the busiest days for retailers.

As many as 23 per cent of shoppers say they are spending less on Christmas gifts this year, an all-time high, says an America''s Research Group poll conducted on 1 and 2 December. Consumer confidence dropped in November to its lowest level since the aftermath of Hurricane Katrina in 2005, says the New York-based Conference Board.

The number of Americans who fell behind on their mortgage payments were at a 20-year high in the third quarter, as borrowers were unable to refinance or sell their homes, the Mortgage Bankers Association reported on Friday. This comes just as President George W Bush announced a freeze on some home-loan rates this week.

However, world''s largest retailer Wal-Mart and the biggest US warehouse-club chain Costco Wholesale both reported November sales that topped analysts'' estimates. Food and pharmacy led the increases at Wal-Mart, which this year offered higher holiday discounts on a wider range of items.

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