Black Friday Weekend Spending Drop Pressures U.S. Stores

Dec. 2 (Bloomberg) -- Deirdre Bolton reports on holiday retail sales on Bloomberg Television's "Market Makers." (Source: Bloomberg)

The first spending decline on a Black Friday weekend since 2009 reinforced projections for a lackluster holiday, increasing chances retailers will extend the deep discounts already hurting their profit margins.

Purchases at stores and websites fell 2.9 percent to $57.4 billion during the four days beginning with the Nov. 28 Thanksgiving holiday, according to a survey commissioned by the National Retail Federation. While 141 million people shopped, about 2 million more than last year, the average consumer’s spending dropped 3.9 percent to $407.02, the survey showed.

The survey results, if borne out at cash registers in American malls and on website checkout screens, herald retailers’ likely return to Black Friday-type discounts this week and suggest added stress for several chains. Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT) already cut profit forecasts after tepid sales gains in back-to-school shopping. While the NRF reiterated its forecast yesterday that total sales in November and December would increase 3.9 percent, the trade group has said it would revise the forecast if necessary later this month.

“Retailers didn’t get what they wanted from Black Friday and they will need to make it up in the next three weeks,” Poonam Goyal, an analyst for Bloomberg Industries, said in an interview. “There will be some panic sales.”

Photographer: Tri-City Herald/Kai-Huei Yau/AP Photo

Shoppers at a Kohl's store in Richland, Washington on Nov. 28, 2013. Close

Shoppers at a Kohl's store in Richland, Washington on Nov. 28, 2013.

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Photographer: Tri-City Herald/Kai-Huei Yau/AP Photo

Shoppers at a Kohl's store in Richland, Washington on Nov. 28, 2013.

Target fell 1.8 percent to $62.80 at 2:54 p.m. in New York. Wal-Mart rose 0.2 percent $81.20, and Macy’s (M) Inc. dropped 0.8 percent to $52.84.

Less-Merry Season

For the fourth year in a row, disposable incomes in 2013 have only inched up and job growth remains inconsistent. As a result, low-income Americans will again have a less-merry season than affluent consumers, who are more flush thanks in part to surging U.S. stock markets, which have attained all-time highs. Consumer confidence declined in November to a seven-month low, according to the Conference Board.

“Consumers are generally not in a great mood, feeling very uneasy about the economy and their jobs, and are looking for value this year,” Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, wrote today in a note to clients. “They have their list and will check it twice, but they are not going to the mall and grabbing a bunch of random stuff because it is on sale or looks nice.”

Early Promotions

Stores have started holiday promotions earlier since the last recession ended in mid-2009 -- even pushing into October -- to try to capture consumers’ first purchases and encourage them to part with more dollars beyond the day’s big deal. Sales in November and December account for 20 percent to 40 percent of U.S. retailers’ annual revenue and 20 percent of profit, according to the Washington-based NRF.

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Pedestrians walk past Macy's Inc. flagship store in New York on Nov. 29, 2013. Close

Pedestrians walk past Macy's Inc. flagship store in New York on Nov. 29, 2013.

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Photographer: Peter Foley/Bloomberg

Pedestrians walk past Macy's Inc. flagship store in New York on Nov. 29, 2013.

The retailers also have tried to take Black Friday -- so-named because of the myth that retailers didn’t become profitable until the day after Thanksgiving each year -- and extend its marketing power to the surrounding days. This year, major chains such as J.C. Penney Co. (JCP) and Macy’s opened on Thanksgiving for the first time.

Thanksgiving Competes for Black Friday Sales

While all this hasn’t persuaded shoppers to spend a lot more, it has given them the perception that deals are always available, Goyal said. That thinking has made the doorbuster bargains associated with Black Friday less effective at getting people to buy beyond one heavily discounted item.

Mission Shopping

This kind of so-called mission shopping, where a consumer buys one bargain-priced item and then leaves, will hurt profit margins, Goyal said. It may also explain why the number of shoppers increased and their spending fell, she said.

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Shoppers walk around the Easton Towne Center in Columbus, Ohio on Nov. 29, 2013. Close

Shoppers walk around the Easton Towne Center in Columbus, Ohio on Nov. 29, 2013.

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Photographer: Ty Wright/Bloomberg

Shoppers walk around the Easton Towne Center in Columbus, Ohio on Nov. 29, 2013.

“That’s really bad for retailers,” Goyal said. Historically, Black Friday deals used to be the best of the year. Now that there are only a few items like that, consumers “are buying those and walking out the door.”

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Jackie Brathwaite did just that on Black Friday as she went out looking for a television. She researched on the Web then decided to go to a Best Buy store in Brooklyn at around 7 a.m. It was sold out there, so she went to a nearby Target location and bought the next option on her list, a 24-inch Westinghouse model for $150, as her only purchase.

“I just wanted a TV,” Brathwaite, a 50-year-old Brooklyn housekeeper, said on Black Friday. “That’s it.”

The early promotions also damped sales during the Black Friday weekend by pulling purchases to earlier in the month, NRF President Matt Shay said on a Dec. 1 conference call with analysts.

NRF Predictions

The NRF has had varied success in predicting holiday sales, which exclude autos, restaurants and gas stations. Last year, it forecast a gain of 4.1 percent for November to December; the actual advance was 3.5 percent. In 2010, it estimated an increase of 3.3 percent and sales instead gained 5.3 percent.

In one of the other early reads on results, sales at brick-and-mortar stores on Thanksgiving and Black Friday posted an estimated 2.3 percent gain to $12.3 billion, according to a report from ShopperTrak, the Chicago-based research company. The results were in line with ShopperTrak’s prediction for holiday purchases to gain 2.4 percent, the weakest since 2009.

With more stores opening on Thanksgiving, sales were pulled forward from Friday, Bill Martin, ShopperTrak’s founder, said in a telephone interview. Sales on Friday fell 13.2 percent from last year, with foot traffic down 11.4 percent. Foot traffic for the combined Thanksgiving-Black Friday period rose 2.8 percent to more than 1.07 billion store visits, ShopperTrak said.

“The consumers really responded to Thursday’s openings, actually more than anybody anticipated,” Martin said.

E-Commerce Gains

The continued rise of e-commerce also may have kept some shoppers at home. Total e-commerce sales reached $20.6 billion in the first 29 days of this holiday season, ComScore Inc. said yesterday. That’s about 3.1 percent more than the period from Nov. 1 to Black Friday last year, the research firm’s data showed. The 2013 numbers include a few more shopping days because Thanksgiving fell on a later date this year.

Amazon.com Inc. (AMZN) was the most-visited online retailer on Black Friday from home and work desktop computers, followed by EBay Inc. (EBAY) and Wal-Mart’s site, ComScore said.

Target said it had twice as many online orders early on Thanksgiving morning as a year ago. Amazon.com lured shoppers by offering discounts as often as every 10 minutes during the holiday week.

Higher Traffic

While traffic at the Mall of America was higher than last year, shoppers planned ahead of time where they were going and what they were buying, said Maureen Bausch, the mall’s executive vice president. There was “a lot of mission shopping, and you don’t normally see that until later in the season,” she said.

That’s bad news for retailers, who normally get about 20 percent of their holiday sales from impulse purchases, said Marshal Cohen, chief retail analyst for NPD Group Inc.

Thom Blischok, chief retail strategist with Booz & Co. in San Francisco, said every one of the 300 shoppers he spoke with on Thanksgiving and Friday had a list.

“They had an absolute plan,” said Blischok, who hit malls and shopping strips around Paradise Valley, Arizona. “I found virtually no browsing.”

That doesn’t bode well for the rest of the year as retailers will now pour on the discounts in an attempt to entice shoppers to keep spending, according to Pam Goodfellow, a director at Prosper Insights & Analytics, the research firm that did the survey for the NRF.

“December will be a hugely promotional month to get those remaining shopping dollars out there,” Goodfellow said on a conference call with reporters yesterday to discuss the survey results. “Retailers will be very aggressive.”

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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