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Retailers Find Sales Registering With Season's Bargain Hunters

Buying eases fears that high fuel costs and giving to storm victims would tap out shoppers.

November 26, 2005|Leslie Earnest | Times Staff Writer

Shoppers packed Southern California stores and malls on Friday, especially those that slashed prices on popular electronics, boosting retailers' hopes for a profitable holiday season.

About 2,000 people ringed the Best Buy store at Lakewood Center, waiting for the 5 a.m. opening. At the same time, nearly 1,000 were gathering outside Wal-Mart in Baldwin Hills Crenshaw Plaza, where video games were selling for $8 and DVD players for $68.

Shopping on the day after Thanksgiving is a 13-year tradition for Genise Brown, who was especially enthusiastic about Best Buy's "buy one, get one free" sale on portable DVD players. Her marching orders for the rest of the day were in the car -- a stack of ads from Old Navy, Mervyn's, Target, Kohl's and Macy's.

"I'm going to spend my money," said Brown, 35, a teacher who lives in Signal Hill.

Across the country, merchants reported that day-after-Thanksgiving traffic was at least as strong as last year, when the day's sales jumped an estimated 11% from the previous year.

That was sure to buoy many retailers, which were unsure what to expect. Initially, industry analysts and economists said this holiday season would be one of the most difficult to predict. They feared that higher gasoline prices, home heating bills, rising interest rates and an outpouring of charitable giving after a season of devastating hurricanes might have left consumers tapped out.

"There's no historical model, no paradigm, that matches this time," said Eli Portnoy, a retail strategist with Portnoy Group Inc. in Los Angeles. "I think this is a wild-card season."

But a new batch of data in recent weeks, including strong retail sales at the end of October, had encouraged some experts to be more optimistic with their projections.

In perhaps the best news, gas prices have dropped dramatically nationwide from the $3-plus-a-gallon stratosphere, where they shot in early September after Hurricane Katrina.

Still, prices remain about 12% higher than a year earlier. And months of expensive gas have drained more than $90 billion from Americans' pockets this year, according to Merrill Lynch & Co., using its rule of thumb that every penny increase at the pump reduces household cash flow by $1.5 billion.

Then there are the utility bills that will be tucked next to holiday catalogs in consumers' mailboxes and are expected to grow ever larger as temperatures fall.

George Gonzalez and his wife, Rosario, commiserated about gasoline prices even as they drove Friday morning from their home in Anaheim to Fashion Island in Newport Beach looking for basics on sale, such as T-shirts and pajamas.

"We have been spending more on gas and rents and everything," said George, a 41-year-old machine operator. Their rent has jumped twice in the last two years even as Rosario's work hours have been cut to part time. So they will spend less this year on the holidays, he said.

For all the mixed signals leading up to Friday, the National Retail Federation, the industry's largest trade group, raised its holiday projection last week, saying it expected sales to rise 6% this season to $439.5 billion. That's up from a previously projected 5% and closer to last year's strong 6.7% gain.

The group said Friday that early feedback from its members indicated that sales this holiday weekend might surpass the $22.8 billion that shoppers shelled out last year. Formal sales estimates will be released this weekend.

Also Friday, Thomson Financial said it expected sales at stores open a year or more to rise a strong 4.1% in November, compared with 1.6% last year. Solid retail trends and an anticipated 39% jump in online sales were key to the increase, said senior research analyst Jharonne Martis, who noted that she was at Circuit City in Union Square in New York when the crowd swelled to the point that police were summoned.

And investors were clearly cheered by what they saw. Best Buy headed the winners list, its shares gaining 3.3% in abbreviated trading. Shares of Circuit City Stores Inc., Tiffany & Co., Limited Brands Inc. and Nordstrom Inc. also rose. A Morgan Stanley index of 35 national retailers hit its highest level since mid-August.

Among the encouraging signs for retailers were October's better-than-expected sales. Retail sales, excluding autos, rose 0.9% last month from a year earlier, handily beating economists' expectations of a 0.3% gain, according to the Commerce Department.

"If the trends remain solid, we may be talking a much better holiday season than largely feared," said Michael Niemira, chief economist for the International Council of Shopping Centers.

"Fear" being the operative word, many retailers slashed prices more aggressively this year, industry experts say. Early markdowns can cut into sellers' profits, but they also mean that shoppers may grab that leather jacket or liquid crystal display television before they "see their heating bills and freak out," said Steve Baker, vice president of industry analysis for NPD Group.

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