140 million to hit US stores on Black Friday amid rebound

A woman uses her smartphone as she waits in line to checkout at a Target store on the shopping day dubbed 'Black Friday' in Torrington, Connecticut November 25, 2011. — Reuters pic
A woman uses her smartphone as she waits in line to checkout at a Target store on the shopping day dubbed 'Black Friday' in Torrington, Connecticut November 25, 2011. — Reuters pic

NEW YORK, Nov 26 — An estimated 140 million US shoppers will hit stores and the Web this weekend in search of post-Thanksgiving discounts, kicking off what retailers predict will be the best holiday season in three years.

While the number of customers chasing deals over the weekend is projected to be roughly the same as last year, they’re likely to spend more on gifts this time around. The National Retail Federation is forecasting a 4.1 per cent gain in retail sales in November and December, the biggest increase since the industry grew 4.8 per cent in 2011.

Falling unemployment, rising wages and lower gas prices have put more money in Americans’ pockets, sending consumer sentiment to the highest level since before the recession hit. Still, stormy weather on the East Coast threatens to hamper travel this week. And brick-and-mortar retailers are under pressure to extend hours and offer steeper discounts — US$29 (RM97) tablet computers, anyone? — to fend off online competition.

“We’re expecting a robust spending weekend,” said Rod Sides, who tracks retail for consulting firm Deloitte LLP. “Basket size will go up — I do think folks are intending to spend more.”

While Black Friday, the day after Thanksgiving, had long been retailers’ main day for doorbusters, deals now stretch from Thursday to the following Monday. Most major US chains will operate stores for at least part of Thanksgiving, and many are opening earlier on the holiday than they used to.

Early start

JC Penney Co will open its doors at 5pm on Thanksgiving, compared with 8pm in 2013. Macy’s Inc plans to get started at 6pm, two hours earlier than last year. Not everyone is encroaching on Thanksgiving, though. Nordstrom Inc and Costco Wholesale Corp will remain closed on the holiday to give employees a break.

Along with extending hours, retailers are in a race to the bottom with their doorbuster specials. Wal-Mart Stores Inc. will start its deals at 6pm on Thanksgiving with an RCA tablet for US$29, US$1.96 DVDs and a 50-inch high-definition television for US$218. Best Buy Co, meanwhile, kicks off at 5pm that day with a 55-inch Samsung 4K television for US$899, down from US$1,400.

“You have to be a player in Black Friday,” said Bob Drbul, an analyst for Nomura Holdings Inc in New York. The weekend represents about 10 per cent of consumer spending during the holidays, he said. “You have to get your share of it.”

Consumer spending

Americans have already been loosening their purse strings this year, boosting confidence that the trend will continue through the holiday season. Consumer spending, which accounts for about 70 per cent of the economy, grew at a 2.2 percent annualised rate last quarter, exceeding estimates for a 1.8 per cent improvement. The gain was spread across durable and nondurable goods, including clothing and housewares.

Consumer spending also may be buoyed by gasoline dropping below US$3, a psychological barrier that could help open up wallets, Drbul said. The average cost of a gallon of regular gasoline was US$2.81 earlier this week, the lowest level in four years, according to automobile group AAA.

Nomura estimates that declining fuel costs may put an extra US$28 billion in shoppers’ bank accounts for the holidays.

Another good omen for this weekend: Many people haven’t started on their holiday lists yet. Almost half of shoppers surveyed by Deloitte last week hadn’t made any of their holiday purchases. Respondents expected to spend an average of US$295 during the Thanksgiving weekend, US$9 more than in 2013.

Thanksgiving browsing

About 45 per cent of consumers plan to shop on Thanksgiving itself, up from 38 per cent last year, according to a survey released last month by consulting firm Accenture Plc.

Mother Nature may create headaches for retailers, though. A snowstorm is forecast to hit the Northeast tomorrow, affecting an area from Virginia to New England. Last year, severe storms and extreme temperatures slowed deliveries and kept shoppers at home.

“Weather is a wild card because if you miss one of the key days, you’re not getting it back,” Drbul said. “People are always dismissive of weather as an excuse, but the truth is that it can be disruptive.”

If retailers miss a few pivotal shopping days, they may have to cut prices to get rid of goods. That will take a toll on profit margins, he said.

There’s also the threat from online retailers such as Amazon.com Inc. E-commerce sites offer the convenience of couch shopping, and they’re getting more aggressive with holiday discounts.

That’s contributed to shrinking foot traffic at shopping malls. Smaller crowds at stores are expected to hamper retail performance into 2015, according to Fitch Ratings Inc. Still, there’s optimism that cheap gas and more spending cash will coax shoppers into their cars — and into malls.

“The US consumer is starting to feel better,” Drbul said. Retailers are set up for “a pretty solid holiday season.” — Bloomberg

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