Discounters Report Sluggish Start to Holiday Season

High unemployment and lingering consumer debt still appear to be weighing heavily on shoppers this holiday season, as retailers reported tepid sales growth for the Thanksgiving weekend. The traditional start to the year-end shopping binge was softer than many analysts had hoped, according to the monthly sales reports from discounters last week, many of whom cited deflation pressures on their food

High unemployment and lingering consumer debt still appear to be weighing heavily on shoppers this holiday season, as retailers reported tepid sales growth for the Thanksgiving weekend.

The traditional start to the year-end shopping binge was softer than many analysts had hoped, according to the monthly sales reports from discounters last week, many of whom cited deflation pressures on their food sales. The results could lead to heavier discounting in the weeks ahead, some analysts projected.

The National Retail Federation, Washington, said U.S. retail shoppers spent about $41.2 billion over the four-day Thanksgiving weekend, up slightly from $41.0 billion last year. As expected, more shoppers were in stores and buying online — 195 million vs. 172 million last year, but average spending was down, to $343.31 per person this year, compared with $372.57 per person in the 2008 Thanksgiving weekend.

“I think price and value are going to remain critical for this quarter, and the next several quarters, considering what the employment situation is,” Chuck Cerankosky, an analyst with Northcoast Research, Cleveland, told SN last week. “Households still have too much debt, and there's a fair amount of insecurity due to the jobs market. Those two factors are going to be underlying overall consumer demand for food and nonfoods for the foreseeable future in our opinion.”

Although discounters who reported monthly sales figures last week said sales growth was tepid compared with last year — when volumes were down significantly — several cited food and consumables among their better-performing categories, at least in terms of unit movement.

Issaquah, Wash.-based Costco Wholesale Corp., for example, said that although overall comparable-store sales for November, excluding gasoline, were flat in the U.S., food sales rose sharply.

“Overall, food and sundries unit sales continued to be strong, with many items showing mid-single- to double-digit unit increases,” Jeff Elliot, director of investor relations, said last week in a conference call.

He noted, however, that although unit sales in food categories were up significantly at Costco, dollar sales volume increases were “softer” because of the impact of lower commodity prices and food deflation compared with year-ago results.

BJ's Wholesale Club, Natick, Mass., also said food sales were up, by about 2% for the month of November, while sales of general merchandise were down 1%. The company said traffic increased 3% and average transaction size declined 2%, reflecting deflation in “high-velocity” categories, including dairy, eggs, meat, milk, and oils and shortenings.

The strongest comps among food categories were recorded in fresh bakery, breakfast foods, frozen foods, juice and produce.

Target Corp., Minneapolis, posted November comparable-store sales declines of 1.5%, citing a 2.5% decline in the average transaction and a 1% gain in transaction counts.

The discounter, which had posted a comp-store sales decline of 10.2% in November 2008, said Black Friday sales were strong, but not enough to compensate for slow sales the rest of the month.

“It suggests that retailers will have to be more promotional than they had planned,” Ken Perkins, president of retail research group Retail Metrics, was quoted as saying last week.