By Anne D'Innocenzio
NEW YORK -- This holiday season, Americans may not spend their green unless they see more red.
Despite signs that the economy is improving, big store chains like Wal-Mart (WMT) and Kohl's (KSS) don't expect Americans to have much holiday shopping cheer unless they see bold, red signs that offer huge discounts. As a result, shoppers are seeing big sales events earlier and more often than in previous holiday seasons.
Retailers are trying to lure shoppers like Marissa Anwar, who has been doing more bargain hunting compared with last year.The operations consultant, who lives in Toronto and New York City, said the economy "hasn't been great" and she has lost clients. As a result, she cut her shopping budget to $2,800 from last year's $4,000. "I was a former 'spend-aholic,'" said Anwar, 29. "Now, I want to make sure I have the money before I spend it." It's a problem that retailers know all too well. Since the recession began in late 2007, stores have had to offer financially strapped Americans ever bigger price cuts just to get them into stores. But those discounts eat away at profits. So far, Wal-Mart, Target (TGT) and Kohl's are among more than two dozen major chains that lowered their profit outlooks for either the quarter or the year. A big reason is the expectation that they'll have to offer huge discounts to get shoppers to spend. There are already signs that retailers are aggressively discounting. Wal-Mart, for instance, on Friday started matching or beating the prices that certain competitors, like Best Buy (BBY), are advertising for some toys and electronics for the day after Thanksgiving -- known as Black Friday. Best Buy also plans to match rivals' prices, even after customers have purchased items. And Target, better known for its whimsical advertising, is touting its prices in holiday TV ads for the first time in at least a decade. The tempered expectations, earlier discounting and lowered profit outlooks from retailers come even though there are indications that the economy is recovering. The job market is making strides. The housing market is starting to come back. And the stock market keeps hitting new highs. All that would ordinarily lead Americans to spend more.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts