Consumers' holiday spending no gift to retailers

For this holiday season, many -- if not most -- retailers have extended their hours, started sales earlier and cut prices aggressively. But retailers have been having trouble getting consumers like Kari Zeiler of New Richmond, Wis. to open their wallets freely.

Zeiler dropped by the Macy's in downtown St. Paul Monday to do some last-minute shopping. She says she is being a lot more restrained in her spending on holiday gifts this year. That goes for most people she knows as well.

"I can see that a lot of people are cutting down and keeping to a budget."

Zeiler believes most people are feeling a financial pinch this year. Money is tight. She suspects many people are uneasy because of the falling value of their homes.

"In our area, housing values dropped considerably. Of course, taxes are going up. I just think people are being conservative because of the market period, gas prices and all that. The prices go up, but the income stays the same"

Merchants need a tremendous late surge in purchases to meet what have been bleak sales forecasts. The National Retail Federation has predicted holiday sales this season will post the weakest growth in five years. Profits are suffering as retailers boost discounts to lure cash-strapped consumers into stores.

Most retailers are expecting a truly blue Christmas. Retail analyst Kurt Barnard says that is what retailers will get.

"By the end of this day, consumers will have given many retailers a considerable big headache. They will now have to figure out ways of working out, working down the inventory they have in their stores."

Back in early November, Minneapolis-based Target had forecast same-store sales would climb 3 percent to 5 percent in December.

Target said Monday that sales at stores open at least a year may actually decline in December. The retailing giant says same-store sales may end up anywhere from a 1 percent decrease to a 1 percent increase for the five weeks through Jan. 5. Home and apparel sales appear especially soft.

Retail Analyst Howard Davidowitz says Target's woes are a sign of how tough things are for retailers.

"When you've got a company like Target saying they're having a problem in home and apparel. Appael! Apparel is Target's raison d'etre! When you're seeing these kinds of things going on with companies like Starbucks, Target, Pennys -- we're not talking about also-rans. We're talking about the best retail companies we have here."

But Dadvidwotz says retailers' troubles simply reflect the growing bind in which consumers find themselves. Davidowitz says most consumers just do not have a lot of money to spend on things that aren't essential.

"The consumer has got the highest debt. Tremendous inflation on food and energy, mortgage resets, negative wealth from housing, negative savings for 24 straight months."

After Christmas shoppers who do have some money left will likely find many bargains in stores. That is the forecast of retail analyst Kurt Barnard.

"For consumers it will be a paradise. Retailers will have to post an avalanche of sale signs."

But big sales will mean lots of red ink for retailers. Many retailers have gone out of business or closed stores already. Analysts warn that deep price cuts could kill even more retailers or drive them to close stores.

To be sure, most of us are not giving up on gift giving. Gabriel Oliha of Lakeville, Minn. has not. He was wrapping up his holiday shopping in St. Paul on Monday afternoon. Oliha says these days we have to give more thought to our giving.

"Everyone should shop, yet take into consideration your pockets, but also just think about giving, reaching out to people."

Dilly-dallying shoppers still have a little time left to shop, if they hurry. Target and Wal-Mart will both close at 6 p.m. Monday.

Gallery

Fullscreen SlidePrevious Slide

1 of 1

Next Slide