By Carl HoweIn most years, the fourth calendar quarter looms large for retailers, since it will often generate more than half -- and sometimes all -- of the profits for the year. This isn't just due to volume; it's also due to the fact that holiday-inspired shoppers are more likely to pay retail prices, thereby driving up margins. But of course, this only works if most retailers hold the line on Christmas sales until the last week or so before Christmas.
The discounting move, which focuses on high definition TVs, cellphones and digital cameras, came a day after the world's largest retailer announced disappointing October sales and a lackluster November outlook.
The discounts, or what Wal-Mart Stores Inc. counts as rollbacks, are effective through Dec. 31. They include such items as Panasonic 42-inch HD plasma TVs, slashed to $1,294 from $1,794; the Polaroid LCD HDTVs, reduced to $997, from $1,297; and Cingular C139 prepaid phones, marked down to $19.97 from $29.98.
As of Sunday's circulars, both Circuit City (CC) and Best Buy (NYSE:BBY), while not matching Wal-Mart's discounts, are both running promotions to get people into stores. The battle for Christmas 2006 is on.
Consumers will undoubtedly be happy about this, and the big box retailers will still have the ability to bolster their products through add-on extended warranties. But it does show just how competitive the retail market will be this Christmas. And while sales could be robust, it's now feeling like a holiday season that is up only three percent over last year instead of the currently predicted five percent. No big deal you think? With consumers expected to spend $457 billion on Christmas this year, a three percent increase over last year instead of five percent would subtract nearly $10 billion from that total. And that's the real cost of marketers getting impatient this year.
To conclude, Monday's Wall Street Journal (sub. req.) has the latest estimates from a variety of sources regarding retail sales growth this year. Our projection of three percent is at the bottom end of their published range of 2.5 to 7.5 percent.