November 28, 2011

The Wall Street Journal

U.S. Weekend Holiday Sales Raise Hopes

Deep Discounts, Early Openings Pay Off
Retailers were cheered that their mix of deep discounts, early openings and website investment produced a strong start to the holiday season. Now, they're plotting more price cuts to keep wary consumers interested for the rest of the key retailing period.

Sales on Black Friday—the big shopping day after Thanksgiving—rose 6.6% from a year ago, according to retail-data and consulting firm ShopperTrak, which uses equipment installed in stores to measure traffic. That compares with an anemic 0.3% gain in 2010. Sales for the four days beginning with Thanksgiving grew 16.4%, according to the National Retail Federation, which surveyed 3,826 people.

The NRF estimated that consumers spent an average of $398.62 on Black Friday weekend, up 9.1% from last year. Of that, $150.53, or 38%, came from online sales.

Indeed, online spending on Black Friday increased 26% from last year, according to market-research firm comScore Inc., which observes the patterns of one million online shoppers and then weighs them statistically to project overall U.S. behavior. And International Business Machines Corp. data unit Coremetrics reported a 24% jump in online sales based on real-time sales data it tracks from more than 500 U.S. retailers.

"It used to be that Black Friday was for going to retail stores and Cyber Monday was online," eBay Inc. Chief Executive John Donahoe said. "Now that line is completely blurred."

Based on early indications, the behemoths of online retailing, Amazon.com Inc. and eBay, will be big winners this holiday season. ChannelAdvisor, which helps more than 3,000 retailers sell across a variety of online-commerce sites, said its clients saw sales from Amazon's third-party marketplace rise 50% on Black Friday compared with a year earlier.

The positive indicators for the e-commerce giants, along with strong overall sales online, prompted predictions that Cyber Monday will be an even bigger day for Internet retailers. That's because Web stores typically save their biggest promotions for Cyber Monday, a term that online retailers coined in 2005 to organize sales on the Monday following Thanksgiving.

In general, the weekend numbers raised hopes that retailers will be able to overcome the drag of high unemployment and the sluggish economy to surpass what had been expectations for a mediocre Christmas, a period that can account for a fifth or more of many chains' sales. But retailers cautioned that consumers remain frugal, and they said they aren't certain the opening weekend's pace can be maintained.

Black Friday sales were up over last year at women's specialty retailer The Limited, which offered 50% discounts on merchandise. But Chief Executive Linda Heasley said that many customers came into the store asking if the deals would be better later in the season. As a result, the private-equity owned chain is planning a lot of discounts between now and Christmas.

"It's going to be a nail biter to the very end," Ms. Heasley said.

GameStop Corp. Chief Executive Paul Raines echoed that sentiment. "I think in this economy, all retailers are watching the unemployment numbers carefully and doing everything we can to stay competitive," he said.

Sales jumped this year in part because retailers like Macy's Inc. and Best Buy Co. opted for the first time to join other large retailers in opening at midnight on Thanksgiving, expanding the hours available for shopping.

Brick-and-mortar retailers are also scrambling to keep up with online rivals. The Limited said its online sales grew more than 40% from a year ago. Fishing-gear retailer Bass Pro Inc.'s online sales surged 96%. Toys "R" Us Inc. CEO Gerald Storch said both in-store and Internet sales were strong on Black Friday.

In general, department stores saw the biggest jump in online traffic, according to Coremetrics, with online sales up 59% from last year. Macy's, Kohl's Corp., J.C. Penney Co., Nordstrom Inc. and other chains have been plowing money into their online platforms, investments that paid off over the weekend.

Meanwhile, e-commerce companies stepped up their efforts to muscle into what has traditionally been one of the biggest days of the year for their bricks-and-mortar rivals.

EBay had a record Black Friday, Mr. Donahoe said. ChannelAdvisor, which counts Dell Inc., Under Armour Inc. and other large retailers as its clients, said that its merchants that sell on eBay saw sales rise 15% on Black Friday. Scot Wingo, ChannelAdvisor's chief executive, said this is a good sign for eBay because the online marketplace typically makes more holiday sales closer to Christmas because customers view it as the "retailer of last resort" for last-minute gifts.

Data from the Thanksgiving weekend also showed that shoppers were purchasing more items using mobile devices such as tablet computers and smartphones. Orders placed from mobile devices accounted for 9.8% of online sales, up from 3.2% a year earlier, Coremetrics said. EBay, for example, said shoppers purchased 2½ times as many items using its mobile app, eBay Mobile.

Lord & Taylor posted record Black Friday sales despite sticking to its 5 a.m. opening even as many of its competitors opened at midnight, said Chief Executive Brendan Hoffman. Categories like shoes, handbags, watches and cosmetics were strongest for the department store, he said.

"While Black Friday doesn't necessarily cement a good Christmas season," he added, "it's nice to get off to a good start."

Meanwhile, Foot Locker Inc. Chief Executive Ken Hicks said he had cautioned his team not to get complacent after a good Black Friday. "This is just the first mile in a marathon," he said.