Retailers lean heavily on bargains to stoke sales

John W. Schoen Senior producer • Profile • E-mail

Despite initial worries about higher energy prices and jittery consumers, the retail industry got off to a strong start over the weekend. Heavy promotion of “early bird” specials touched off stampedes of shoppers busting down the doors, in some cases, before sunrise.

But the holiday shopping season still has a long way to go. Sales results for the weekend overall were mixed. And if foot traffic slows in the coming weeks, expect to see even bigger discounts: good news for shoppers, but bad news for the industry’s bottom line.

Die-hard shoppers eager to snap up limited “door buster” specials produced an initial rush in the early hours of “Black Friday” – the traditional opening day of the holiday shopping season. But there were signs that the Thanksgiving shopping weekend faded in the final stretch. The retail research firm ShopperTrak reported that traffic dropped off on Saturday, and that the combined sales for Friday and Saturday slipped to $13.4 billion – down a half a percent from a year ago.

"There was a lot of hype, a lot of promotions and lot of people, but the results were on the lukewarm side," said Michael Niemira, chief economist at the International Council of Shopping Centers, estimating that the weekend's sales results were down from a year ago. Heavy markdowns forced retailers to sell more goods in order to meet sales targets, he said.

Among the biggest weekend winners were discount giants like Wal-Mart and electronics retailers, analysts say.

To avoid a repeat of last year’s lackluster season, national retail chains like Wal-Mart began cutting prices and opening doors earlier than usual this holiday season. The world’s largest retailer began its promotional drive -– including a promise to match any competitors’ lowest price -– at the start of the month. So far, the plan seems to be paying off: Wal-Mart said its preliminary tally showed sales for the entire month of November were up 4.3 percent form a year ago – a marked improvement from last year’s sales gains of 1.5 percent.

To try to stoke consumers’ holiday shopping fever, other retailers also picked up the pace of promotions, in many cases moving their “door buster” opening hours as early as 5 a.m. Some 78 percent of retailers increased their promotions from past year, according to Goldman Sachs.

But the turnout was mixed. Some specialty retailers and mall-based department stores didn’t fare as well as big box discounters and electronics chains, said analysts. 

“It’s always a feast or famine depending on the individual retailer, so there are some companies out there like Sears and Kmart that continue to struggle,” Robert Buchanan, a retail industry analyst at A.G. Edwards, told CNBC. “We’ve got a lot of chasms between the haves and have nots.”

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