Discounts May Hurt Retailers' December Profits

Nov. 28 may fall only once on the calendar, but Cyber Monday came twice this year at J.C. Penney and Sears Holdings —once on the day after Thanksgiving weekend and again a week later. Ditto for Black Friday at New York’s J&R Electronics. And Target on Dec. 8 began its “Almost Last Minute Sale”—even though Christmas was weeks away. These revisions to the holiday calendar, and the discounting that accompanies each tweak, show just how determined retailers are to keep the attention of consumers this Christmas season.

Typically, stores let up on the deals after Thanksgiving weekend. Yet amid worries about lingering unemployment and the health of the economy, retailers this year are continuing to roll out discounts. That’s likely to hammer profit margins, especially for merchants facing higher labor and raw material costs. To see big promotions after Black Friday “is a bit alarming,” says Poonam Goyal, a Bloomberg Industries analyst. “Investors expected margins to be down due to inflation, but they didn’t expect margins to be down from more promotions.”