Poor US Black Friday sales point to dismal holiday shopping ahead

In a worrisome sign for US retailers, data released showed that sales rose a scant 0.5 per cent on the traditional kickoff to the holiday shopping season despite early signs of a strong showing.

A focus on bargains pulled US shoppers into stores and onto websites over the Thanksgiving holiday weekend, but many said they would stick to their budgets and avoid purchases if they could not find a good deal.

Those trends appeared to play out in the results issued by ShopperTrak, which measures customer traffic in stores. The firm said retail sales rose to $10.66 billion (Dh39bn) on Black Friday, which often is the single busiest shopping day of the holiday season and can set the tone for the weeks leading up to Christmas on December 25.

In 2008, Black Friday sales measured by ShopperTrak rose three per cent compared to the prior year's Black Friday. Last year's entire holiday season marked the worst performance in nearly 40 years. The firm stuck by its forecast for total holiday sales to rise 1.6 per cent this year compared to 2008.

"I figured Black Friday would be up one per cent or maybe two per cent, just because of the deal-consciousness of folks," said Patricia Edwards, founder and chief investment officer of Storehouse Partners, an investment advisory firm based in Bellevue, Washington. She noted that early November deals from stores and online promotions also may have diverted traffic.

"It's possible it took some of the glory out of the Friday number," she said.

Shoppers spent 35 per cent more on Black Friday web purchases than a year earlier, with the average order value reaching $170.19, according to online retail analytics company Coremetrics. Those shoppers bought an average of 5.4 items per order, up from 4.6 items last year, Coremetrics said.

Industry executives and analysts have predicted a tough holiday season that may show only a slight improvement over 2008 due to a weak economy and high unemployment.

But their optimism had crept up earlier this week. Analysts polled by Thomson Reuters Data on Friday had increased their forecast for November retail same-store sales to a 2.5 per cent increase, from a previous view of 1.8 per cent.

"This will be the hardest holiday season ever to predict," said Eric Karson, associate professor of marketing at the Villanova University School of Business in Pennsylvania.Retailers used to offer steep promotions on select items as the initial lure for shoppers, in the hopes they would buy more inside the store. Consumers now expect such discounts as a matter of course.

"We have this big game of chicken now evolving between the retailers and the customers," Karson said.

Claude Smith, a 45-year-old out-of-work plumber from Virginia, said he was trying to pay off his bills from his credit card, which now has a higher interest rate. He pays with cash when he visits stores such as TJX's AJ Wright and Wal-Mart. "Things are bad. Everybody's thinking about saving everything they have. I go out when there's sales and that's it," said Smith, who visited the Galleria at White Plains mall in New York with his two teenagers on Saturday.

Many shoppers showed they were relying on lessons learned from the 2008 season, which began just after a global financial crisis erupted. A US unemployment rate above 10 per cent and other financial pressures also weighed on their minds.

"I have three children. I am a single mom. The economy is bad. I am getting only those things that we really need," said Natasha Walker, a 35-year-old telephone operator shopping in Times Square in New York. Her purchases included a GPS navigation system for her car, CD holders, movies for her children and clothing for herself.

Shawn Kravetz, President of hedge fund operator Esplanade Capital, said retailers that slashed costs will do well.

"You can count companies with positive comps [an increase in existing store sales compared to the prior year] on two hands – J Crew, Wal-Mart, Chico's and few others. That is not a strong holiday," he said.

Even though online sales are growing, they still account for less than four per cent of total retail sales, Karson said. Wal-Mart Stores' site Walmart.com was the most popular retail site on Thanksgiving for the fifth year in a row, followed by Amazon.com.

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