US stores brace for big shopping day

Listen to this article

00:00
00:00

US retailers will on Friday join battle in earnest for their share of holiday season spending, as stores open after the Thanksgiving holiday for one of the biggest shopping days of the year.

The National Retail Federation is predicting that 130m people will visit the stores over four-day weekend that includes “Black Friday” - traditionally the day on which retailers move into profit for the year.

Earlier this week, the NRF raised its forecast for holiday sales during November and December to $439m, a 6 per cent increase on last year, from an earlier forecast of a 5 per cent increase in spending.

The NRF cited a strong rise in October and September retail sales of 7.2 per cent, and the impact on consumer confidence of a fall in petrol prices, which are now hovering around $2.10 a gallon, after going above $3 in September.

But the NRF forecast is still below last year’s 6.7 per cent increase in holiday sales, and US gasoline prices are still more than 10 per cent higher than they were last year. The forecast rise in spending is also likely to be offset for retailers’ bottom line by reduced margins as a result of aggressive price cutting.

Underlining the caution, the Conference Board reported this week that a survey of 5,000 households by TNS, the research firm, found that the average family’s spending plans were virtually unchanged from last year - with an average estimate of $466, down $10 on last year’s estimate.

Karen Franco, director of consumer research at the Conference Board, said she expected that “this cautious attitude will have consumers shopping for bargains this season.

“Retailers will need to offer discounts and promotions to get shoppers into their stores.”

Kurt Barnard, an independent retail consultant, suggested the positive impact of falling fuel prices could be offset by other factors, including news of General Motors’ decision to close manufacturing plants.

“We are dealing with a difficult economic climate...This is going to be a Christmas shopping season characterised by frugality”.

Retailers’ efforts on Friday will include the traditional special on-the-day bargains for early shoppers, with stores opening as early as 5am.

Wal-Mart, the largest US retailer, is also offering to match the on-the-day special price reductions of any of its rivals, in a continuation of an aggressive holiday marketing campaign that it began on November 1, two weeks earlier than last year.

The discount retailer has vowed that it would not repeat its poor start to last year’s holiday, when it reported sluggish November sales, which it attributed to an overly cautious approach to price-cutting and marketing.

Walmart.com has also been offering special holiday bargains for the five days of the Thanksgiving week. Acording to Shop.org - part of the NRF - 46 per cent of online retailers are extending special offers to the Monday after Thanksgiving - dubbed Cyber Monday - which has seen an increasing spike in online gift orders.

Mike Niemira, chief economist at the International Council of Shopping Centers, also noted that retailers risked exacerbating the usual lull in sales at the start of December through overly aggressive price promotions over the weekend.

“In many cases you can have a very good holiday weekend, and a poor holiday season ... I would be extremely cautious about extrapolating from the weekend’s performance,” he said.

Last year, according to the National Retail Federation, shoppers spent $22.8bn during the four-day Thanksgiving weekend, accounting for just over 5 per cent of total retail sales of $414bn in November and December.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.