Slow holidays add to Target's problemsby Martin Moylan, Minnesota Public Radio
Retailers are already thinking of Christmas, but not with much joy. With the economy in a funk and consumers worried things could get worse, it's looking a like a pretty lean Christmas for most retailers. That includes Minneapolis-based Target, which has already been struggling with slowing sales and problems in its credit card business
St. Paul, Minn. — As Target looks toward the holiday shopping season, it certainly doesn't seem Santa and his helpers will deliver the seasonal sales kick they usually have.
The National Retail Federation predicts sales for the upcoming holiday season, will be the slowest since 2002.
Shoppers at the Roseville SuperTarget agree this will not be a typical holiday season for retailers.
Dorothy Cole of Falcon Heights expects most consumers will keep a really tight hold on their wallets and credit cards this holiday season.
"There are so many people out of work or underemployed, they've got all they can do to buy food without buying luxuries," Cole said.
And when people do spend money on holiday gifts, it's a good bet they'll be more judicious about what they buy and how they shop.
Vicki Johnson of Roseville expects people will think more before they buy this year.
"I think everybody's watching their dollars a little bit tighter, maybe trying to get more for their buck, versus going for the big ticket items," Johnson said. "As consumers, we're probably making our decisions a little bit more wisely and thought-out, looking for the sales and going to the Targets and the Wal-Marts."
But Wal-Mart has been doing better than Target as worries about the economy have grown.
Analysts say that's because Wal-Mart focuses more on low prices, food and other essential items. Target is more dependent on fashionable apparel, furnishings and other stuff shoppers will do without in hard times. While Target's sales for stores open at least a one year fell in the third quarter, Wal-Mart's rose.
"Wal-Mart is dramatically better positioned," said retail consultant Howard Davidowitz. "Target is doing 40 percent of their business on discretionary apparel and home," he said. "The consumer is in survival mode."
Davidowitz said consumers will cut spending and shift their shopping to stores where their money goes the furthest. They'll sacrifice quality, selection and style for price.
"The consumer is going to spend much less than they have in the past," Davidowitz said. "It's that simple. They will spend more online, more at Costco and Wal-Mart and Dollar General and Family Dollar. They will spend more in those places. But, they will spend less in all the other segments of retailing, which is 95 percent of retailing."
Credit cards are another issue for Target. The retailer still has a large credit card business.
The company declined to comment for this story. But Davidowitz notes now is not a good time to be in the credit card business.
"The consumer is falling further and further behind on their auto loans, on their credit cards payments, on their student loans, on their mortgage payments," Davidowitz said. "Consumer bankruptcies are exploding. They're going through the roof. So, if you got an exposure to a credit portfolio, you're in terrible shape."
In late September, Target said it was on track to write off nearly 10 percent of what consumers owe it on credit cards, resigning itself to not collecting much of that money, at least, and perhaps most of it.
With a weak economy, retailers will have to work hard for whatever they get. Stephanie Hoff, an Edward Jones retail analyst, is forecasting a lot of price cuts. "The economy is very weak," Jones said. "Consumer spending is very weak, and consumers are going to be looking for bargains. So, I have no doubt we will see plenty of bargains this holiday season."
Big price cuts will be the only thing that'll get some shoppers into stores. Sue Jungk of St. Paul expects shoppers will be far slower to spend this holiday season.
"I think people will probably wait till the last minute to see what they can afford," Jungk said. "I know I'm cutting down a lot. That's kind of what I'm looking at."
And with so many shoppers sharing that sentiment, Target and most other retailers face their toughest holiday season in years.
- Morning Edition, 10/20/2008, 7:40 a.m.