became the latest in a string of retailers to get outpromoted at the start of a holiday season that so far has seen a lack of hotcakes.
While industry analysts say consumer electronics boasts some of the season's most popular items, Circuit City reported a drop in third-quarter sales Monday, excluding a gain from a recent acquisition in Canada, that showed total sales down 2.1% and comps down 4.3%.
Commenting on the disappointment, the company echoed a growing chorus in the retail community, blaming its shortfall, in part, on a strategic decision to back off on promotional activities.
Most notably, the comments were reminiscent of
claim last week that its November sales miss was tied to a lack of promotional discounts over the Thanksgiving shopping weekend. Its chief rival,
, fared better with its aggressive holiday campaign of discounts and marketing efforts.
In response, Wal-Mart said it would launch a new advertising campaign, trumpeting low prices, and it already has.
"There's a really interesting conundrum here between what retailers want to do and what consumers are demanding," said C. Brit Beemer, chairman of America's Research Group. "Most retailers are more focused on Wall Street rather than Main Street, so they're focused on how they can cut expenses and reduce margin reductions so they don't end up giving away a lot of their profits.
"On the other hand, there is no new, hot toy this Christmas, no new, hot electronics item and no hot apparel look, so consumers don't see a reason to spend money," Beemer added. "The way you get consumers excited in this environment is you have to give them a deal."
Other than retailers like
American Eagle Outfitters
, clothing chains that appear to be in sync with fashion trends at the moment, retailers that showed upside in November were those that were slashing prices, such as
J.C. Penney touted deals like $10-off coupons to drive traffic, and Sears promoted heavily in a bid to get rid of excess inventories. Both companies beat expectations in November amid a slew of overwhelmingly disappointing sales data.
slashed its fourth-quarter and full-year earnings forecasts after reporting an 8.3% drop in November same-store sales, as its chains drew fewer customers. The company said it was increasing promotions.
"We were heavily promotional with our fall merchandise as planned, but because our holiday assortment was not as well-received as anticipated, we accelerated the promotional cadence on select categories as well," Ann Taylor Chairman J. Patrick Spainhour said in a news release.
, another disappointment, posted total sales of $1.4 billion, matching the year-ago period. In light of the flat performance, it lowered its outlook for operating margins and signaled a focus on promotions in the fourth quarter.
"As customers head into the peak holiday shopping period, we are closely managing our holiday promotions to offer compelling value," said Sabrina Simmons, senior vice president in charge of treasury and investor relations, in a statement.
Ulysses Yannas, a retail analyst with Buckman, Buckman & Reid, said it had been particularly hard for apparel retailers to anticipate the response to their products going into the season.
"In retailing, you cannot always be 100% right, especially in apparel," Yannas said.
But shortfalls at Circuit City and Wal-Mart show that miscalculations went beyond the fashion world, and retailers are now scrambling to refine strategies in preparation for a fourth-quarter selling bash that has become even more important to their annual performance.
Kurt Barnard, president of Barnard's Retail Consulting, said retailers anticipated a lackluster holiday when they placed inventory orders last summer, and there is still plenty of time for them to adjust and meet expectations.
"Many retailers are disappointed so far in the performance of their stores, but it has not reached the point of desperation," Barnard said.