Holiday Sales Drop at Least 5.5%

Updated from 1:45 a.m. EST

By Lauren Shepherd

NEW YORK -- Bargain-hunters hit the stores early Friday to take advantage of drastic price cuts offered by retailers desperate to get rid of old merchandise and boost their less-than-cheery holiday sales.

Many retailers opened before 6 a.m., offering deals like 50% to 75% off on toys, furniture, electronics and clothing. J.C. Penney(JCP Quote) opened at 5:30 a.m. EST -- the earliest post-Christmas opening in the chain's history -- and offered customers more than 100 "door busters" until 1 p.m, including 75% off Christmas decorations. The chain even made wake-up calls to customers who signed up online.

Shoppers arrived at 6 a.m. the day after Christmas at Macy's(M Quote) flagship store in Manhattan to take advantage of deeply discounted merchandise.

Stores were hoping the discounts would entice shoppers to redeem gift cards and use cash from returning unwanted gifts to buy something new.

But with gift card sales down this holiday season and consumers looking to save money rather than spend it, even the big discounts may not be enough to save what looks to be one of the most dismal holiday shopping seasons in years.

Holiday sales typically account for 30% to 50% of a retailer's annual total. But shoppers cut back their spending this year as they struggled with job cuts, home foreclosures, portfolio losses and other economic woes. Strong winter storms during the holiday season also kept some would-be shoppers at home.

According to preliminary data from SpendingPulse -- a division of MasterCard Advisors that tracks total sales paid for by credit card, checks and cash -- retail sales fell between 5.5% and 8% during the holiday season compared with last year. Excluding auto and gas sales, retail sales fell between 2% and 4%, according to SpendingPulse.