The Wall Street Journal
Forecasters expect a better holiday season for U.S. retailers, but say the price will be more discounts to get consumers shopping.
The National Retail Federation expects holiday sales to rise 2.3% over last year to $447.1 billion, the biggest increase in three years, in part because of more aggressive pricing strategies. The tone was set by the discount-driven back-to-school shopping season, which wrapped up in September with strong sales of children's and teen clothing, according to MasterCard Inc.'s SpendingPulse unit that tracks payment by cash, check and credit card.
"We expect a very, very competitive and aggressive Christmas and holiday selling season, price-focused," Bill Simon, chief executive of Wal-Mart Stores Inc.'s U.S. business, said at a recent conference.
The International Council of Shopping Centers released its forecast Tuesday, predicting an increase in sales during the holiday shopping season of between 3% and 3.5%.
The shift back into discounting mode is an about-face from the previous holiday season and earlier this year, when lean inventories allowed retailers to hold the line on prices. But retailers were forced to roll out promotions to bring customers into their stores when shopping sputtered out in late spring and summer.
Back-to-school purchases provided a boost in August and September, but consumers aren't buying aggressively enough to signal an all-clear for the crucial holiday period. Last week, the Conference Board's consumer confidence index unexpectedly plunged to its lowest reading since February.
On Tuesday, women's retailer Talbots Inc. cut its sales projections based on "inconsistent" third-quarter traffic. Meanwhile, Saks Inc. said it would close its store in Southampton, N.Y., the sixth store it has decided to close this year.
September sales benefited from a holiday weekend. Specialty apparel sales rose 3.8% in September from a year earlier, according to MasterCard's SpendingPulse.
Sales of clothing were driven by purchases for children, up 2.3% over the prior-year period, as well as those for teens, up 7.9%. Parents weren't spending on themselves, however, with men's and women's apparel down 3.4% and 0.2%, respectively.
Danyelle Little, a mother of two who lives in St. Louis, waited to buy clothes for her 16-year-old son until Labor Day weekend. She took advantage of sales, such as two-for-one shorts at American Eagle Outfitters Inc. "I can't spend what I would like to spend in fear of the well running dry," said Ms. Little, a freelance writer. "I get what we need. I don't get what we want."
Ms. Little has also started saving for the holidays with the Christmas Club Card program at Kmart, a division of Sears Holdings Corp. She has been adding $30 every two weeks since August and plans to use the money, as well as the 3% interest she earns on the card, to shop for Black Friday toy sales.
Consumer electronics, meanwhile, saw relative strength, with a 4.7% increase last month over the year-earlier period. September growth came from purchases in the $500 to $1,000 category, as well as purchases under $25, according to SpendingPulse.
National Retail Federation President Matthew Shay said in an interview, "Consumers continue to be reactive to price, and there are many retailers out there that are competing on price."
A more comprehensive picture of September sales will come on Thursday, when 28 retailers report monthly figures. Those companies don't include the largest U.S. retailer, Wal-Mart Stores Inc. Analysts polled by Thomson Reuters forecast an increase of 2.1%.
The September price wars were particularly evident in the teen sector. Aéropostale Inc., a heavily promotional retailer, saw more competition this season as its higher-priced peers took deep discounts. It responded with select hoodies on sale for $14.99, the same low level it offered on Black Friday last year, says John Morris, an analyst at BMO Capital Markets.
"There's no doubt that the current climate is more promotional," said Aéropostale Co-CEO Mindy Meads at a conference last month. "In select categories, (our competitors are) hitting a little harder, which is causing us to promote harder."
That mentality was also seen in the adult sector. Gap Inc. offered a steady stream of discounts throughout the month. The new black pant styles at Gap's namesake brand—regularly priced at $49.50 to $59.50—were marked down to $35 for the first three weeks of September. At the end of the month, Gap gave shoppers 25% off their entire purchase, while Gap unit Banana Republic offered an extra 25% off all sale styles.
The National Retail Federation expects holiday sales to rise 2.3% over last year to $447.1 billion, the biggest increase in three years, in part because of more aggressive pricing strategies. The tone was set by the discount-driven back-to-school shopping season, which wrapped up in September with strong sales of children's and teen clothing, according to MasterCard Inc.'s SpendingPulse unit that tracks payment by cash, check and credit card.
"We expect a very, very competitive and aggressive Christmas and holiday selling season, price-focused," Bill Simon, chief executive of Wal-Mart Stores Inc.'s U.S. business, said at a recent conference.
The International Council of Shopping Centers released its forecast Tuesday, predicting an increase in sales during the holiday shopping season of between 3% and 3.5%.
The shift back into discounting mode is an about-face from the previous holiday season and earlier this year, when lean inventories allowed retailers to hold the line on prices. But retailers were forced to roll out promotions to bring customers into their stores when shopping sputtered out in late spring and summer.
Back-to-school purchases provided a boost in August and September, but consumers aren't buying aggressively enough to signal an all-clear for the crucial holiday period. Last week, the Conference Board's consumer confidence index unexpectedly plunged to its lowest reading since February.
On Tuesday, women's retailer Talbots Inc. cut its sales projections based on "inconsistent" third-quarter traffic. Meanwhile, Saks Inc. said it would close its store in Southampton, N.Y., the sixth store it has decided to close this year.
September sales benefited from a holiday weekend. Specialty apparel sales rose 3.8% in September from a year earlier, according to MasterCard's SpendingPulse.
Sales of clothing were driven by purchases for children, up 2.3% over the prior-year period, as well as those for teens, up 7.9%. Parents weren't spending on themselves, however, with men's and women's apparel down 3.4% and 0.2%, respectively.
Danyelle Little, a mother of two who lives in St. Louis, waited to buy clothes for her 16-year-old son until Labor Day weekend. She took advantage of sales, such as two-for-one shorts at American Eagle Outfitters Inc. "I can't spend what I would like to spend in fear of the well running dry," said Ms. Little, a freelance writer. "I get what we need. I don't get what we want."
Ms. Little has also started saving for the holidays with the Christmas Club Card program at Kmart, a division of Sears Holdings Corp. She has been adding $30 every two weeks since August and plans to use the money, as well as the 3% interest she earns on the card, to shop for Black Friday toy sales.
Consumer electronics, meanwhile, saw relative strength, with a 4.7% increase last month over the year-earlier period. September growth came from purchases in the $500 to $1,000 category, as well as purchases under $25, according to SpendingPulse.
National Retail Federation President Matthew Shay said in an interview, "Consumers continue to be reactive to price, and there are many retailers out there that are competing on price."
A more comprehensive picture of September sales will come on Thursday, when 28 retailers report monthly figures. Those companies don't include the largest U.S. retailer, Wal-Mart Stores Inc. Analysts polled by Thomson Reuters forecast an increase of 2.1%.
The September price wars were particularly evident in the teen sector. Aéropostale Inc., a heavily promotional retailer, saw more competition this season as its higher-priced peers took deep discounts. It responded with select hoodies on sale for $14.99, the same low level it offered on Black Friday last year, says John Morris, an analyst at BMO Capital Markets.
"There's no doubt that the current climate is more promotional," said Aéropostale Co-CEO Mindy Meads at a conference last month. "In select categories, (our competitors are) hitting a little harder, which is causing us to promote harder."
That mentality was also seen in the adult sector. Gap Inc. offered a steady stream of discounts throughout the month. The new black pant styles at Gap's namesake brand—regularly priced at $49.50 to $59.50—were marked down to $35 for the first three weeks of September. At the end of the month, Gap gave shoppers 25% off their entire purchase, while Gap unit Banana Republic offered an extra 25% off all sale styles.
