Retailers Reach for Last-Minute Shoppers

Despite the discounts, customers are holding back this year.
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SAN FRANCISCO - Shoppers swarmed the malls over the weekend, but despite all the heavy promotions, stores were not packed elbow-to-elbow as retailers would have liked.

Monday marks the last day for retailers to make up the traffic lost during a lackluster holiday shopping season this year. Although some may have gained ground over the last couple of days by offering aggressive discounts, it's doubtful that anyone will blow out their numbers.

A survey of customers on Sunday by America's Research Group found that 71% say they completed their shopping over the weekend, down from 85% the year before, making a last-day surge less than likely.

"They're going out there, but there's not a lot of buying going on," says Britt Beemer, chairman and founder of America's Research Group. "With only one day to go, there won't be a lot of Christmas presents under the tree."

Beemer believes consumers are cutting back on the number of gifts they give to their friends and family. So instead of mom and dad getting three or four presents, for instance, they might only get one or two this year.

Nonetheless, retailers are still pushing hard to entice as many shoppers through their doors as possible before resorting to post-Christmas sales, which force them to cut their prices even deeper, eating away at already vulnerable margins:

Macy's

(M) - Get Report

was advertising 20% to 65% off its merchandise on Monday.

J.C. Penney

(JCP) - Get Report

and

Kohl's

(KSS) - Get Report

were offering discounts of 40% to 60%. And

Target

(TGT) - Get Report

was knocking down prices by 30%.

Online sales have already seen their holiday peak. According to research firm comScore, sales via the Web climbed 19% between Nov. 1 to Dec. 21, accounting for more than $26 billion.

"At this point of the season, the heaviest online spending days are now well behind us," says comScore Chairman Gian Fulgoni. "However, with some online retailers offering deliveries before Christmas for orders placed by Dec. 22, and in-store pickup available for orders placed through Christmas Eve, we expect to see above-average growth rates continue through the holidays."

Some retailers, while enticing customers with holiday discounts, were simultaneously promoting their new arrivals.

J. Crew

(JCG)

,

Gap

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and

Abercrombie & Fitch

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had all posted links on their Web sites for their latest line of apparel.

That may come in handy when shoppers decide to redeem their gift cards. The International Council of Shopping Centers notes that gift cards have accounted for 10% to 15% of holiday spending in recent years, and as much as 30% to 40% of them -- or some $15 billion to $20 billion -- will get redeemed after Christmas through January.

Marshal Cohen, an industry analyst for the research firm NPD says that January is likely to tilt holiday sales in retailers' favor.

He points out that 61% of the consumers he surveyed last week said they had purchased gift cards for the holidays -- a big jump from the 36% who had said they had purchased them last year in the same period.

December, however, still remains up in the air. The International Center for Shopping Centers predicts sales at stores open at least a year will increase by only 1.5%.

Adrienne Tennant, an analyst for Friedman Billings Ramsey, noted in her research that while traffic at stores has been high, the conversion into sales has been softer than last year.

But she added that most of the retailers she covers have planned for inventories to be down, which should allow them to cut back on the most extreme markdowns during the season.

Richard Jaffe, an analyst for Stifel Nicolaus, expects only modest gains by retailers.

"We believe the holiday season has been challenging with sales deteriorating more than we anticipated following a relatively strong Black Friday weekend," he wrote in his research. "In our opinion, a difficult macro environment and adverse weather in the past two weeks...have held back sales during the important holiday season."

Indeed, Cohen says that while he has noticed an uptick in traffic over the weekend, it won't be enough to make up for what retailers have already lost.

"You're not going to see the numbers to make up the difference," he says. "You're going to have to wait to see what happens after Christmas."