Holiday Retail Season May Disappoint

U.S. shoppers were out in full force Sunday picking up last-minute gifts, trying to catch up on holiday shopping (searchthat was delayed by bad weather earlier this month or just looking for deals.

"The craziness has started, no question," Julie Goldman, general manager at The Falls in Miami, a shopping center in Miami, Florida, managed by Taubman Centers Inc. (TCO), said.

But some financial analysts are concerned that the holiday shopping season will wind up bearing a sharp resemblance to Santa Claus -- it will be soft in the middle.

"The luxury stores are the ones hitting the home runs and the discount stores are going to end up doing some pretty good numbers," Britt Beemer, chairman and founder of America's Research Group (search), said. "I'm very worried that the middle part of the market is not here."

This middle market covers mid-priced department stores and apparel retailers (search), as well as some toy stores and other retailers.

Beemer, whose group conducts surveys to track consumer trends, had originally forecast a 4.8 percent sales gain for the holiday season this year compared to last year. But last week, he cut that forecast to a 4.2 percent gain.

Beemer said he may have to downgrade his overall sales forecast again. He noted that while people were buying gifts for others, they were not buying "something nice for themselves," which is that extra hit retailers really need.

Before the Christmas shopping season started, analysts had been expecting improved consumer sentiment to spur a 5 percent to 7 percent increase in sales, while tighter inventories were expected to help retailers avoid the rampant discounting that cut into profits.

But retailers were seen offering more sales last week, while discounters Target Corp. (TGT) and Wal-Mart Stores Inc. (WMT) said December sales were not as strong as expected.

Those chains will give sales updates on Monday. A Wal-Mart spokeswoman said Sunday that the world's largest company's stores were "really busy," with shoppers grabbing more expensive electronic items.

"There's a lot of customers shopping, picking up the last minute gifts and the big ticket items" like home theater systems and 27-inch flat screen televisions, Christi Gallagher, a Wal-Mart spokeswoman said.

The holiday shopping season in November and December accounted for nearly a quarter of retailers' annual sales last year and some stores earn all of their profits in that period.

Trained to Wait

U.S. consumers have become conditioned to wait until the last minute to do their Christmas shopping, expecting retailers to slash prices just before Christmas Day.

"We always wait for the last weekend. It's when everything goes on sales," Rick Haas said while shopping for his family at the Newport Mall in Jersey City, New Jersey.

Several stores in that mall had signs in the windows advertising 40 percent to 50 percent discounts. At a Limited (LTD) store, $44.50 sweaters were on sale for $19.99.

Deep discounts at apparel stores did not come as a surprise to some retail managers, who noted that trendy "must-have" items were hard to identify this year.

"If you are a mid-market apparel store, you don't have the trends," Goldman said.

Sears, Roebuck and Co. (S), the largest U.S. department store operator, which said in a news release earlier this month that "the promotions are on and Sears is in the game aggressively," had sales in many departments, including all kitchen appliances, sales on all tools and other items Sunday through Tuesday. The retailer also plans a sale for senior citizens on Tuesday, spokesman Bill Masterson said.

But he also said that the discounts were planned before the holiday season began and were no deeper than the company expected.

"This weekend we had planned to be heavily promotional, and it has been," he said.