Black Friday sales intensify in downturn

Shoppers walk with their purchases in the SoHo neighborhood of New York November 22, 2008.

NEW YORK (Reuters) - Black Friday, the traditional start to the U.S. holiday shopping season, means more to retailers this year as they struggle to win over consumers with a recession looming.

Black Friday falls on November 28, the day after the Thanksgiving holiday, and many stores have already begun advertising deep discounts to attract shoppers as early as midnight.

Retailers that fail to rack up sales during the three-day weekend face the prospect of clearing out merchandise at profit-crunching prices closer to Christmas.

"While Black Friday sales and promotions have been tremendously successful for the last few years, the day itself takes on a bit more importance when consumers are struggling," said Ellen Davis, spokeswoman for the National Retail Federation. "In a down economy, people are willing to get up at 3 a.m. and sit in a line outside a store."

Retailers ring up roughly 10 percent of total holiday sales during the three-day weekend, best known for the deals offered on Black Friday -- named for the days when store chains used to turn a profit for the year.

The weekend's results do not always indicate how overall holiday sales will fare, but with the United States likely in a consumer-led recession, it has added importance.

Consumers will look for bargain-basement prices to help meet austere budgets, while retailers from Wal-Mart Stores Inc to Saks Inc learn if they have the right products at the right prices.

"This year, the Black Friday weekend has profound impact on how consumers and, more importantly, how retailers are going to view the holiday season in totality," said Janet Hoffman, managing partner of Accenture Ltd's global retail practice.

MAKE OR BREAK?

The contracting U.S. economy has already slashed profits for many retailers and pushed some into bankruptcy, including electronics retailer Circuit City Stores Inc. Many view the entire holiday season as a make-or-break period.

"If Black Friday tends to be not as successful, then they're going to be stuck with more inventory and they're going to have to mark down further," said Erin Hershkowitz, a spokeswoman for the International Council of Shopping Centers.

Retailers have fretted about the upcoming holiday season since last year's holiday, when consumer spending began to crack under the weight of the slowing housing market.

The outlook for the consumer has only darkened this year, taking a turn for the worse in September when a financial crisis swept across the globe. In its wake, banks have tightened lending and cut credit -- severely limiting the ability of shoppers to spend.

Some analysts forecast that holiday sales, which include November and December, could even fall -- something that has not happened since the NRF began tracking the sales in 1992.

In response, retailers have been rolling out non-stop bargains. Wal-Mart offered 10 popular toys for $10 in October, Toys "R" Us has touted its "lowest prices of the season" and Gap Inc offered 30 percent off last weekend -- all well before Thanksgiving.

NRF's Davis said shoppers expect even more bargains and low prices during the Black Friday weekend.

"While retailers have already come out with a lot of sales and discounts, consumers have been trained that there is still something in retailers' bag of tricks," she said. "They know that retailers are planning something big for Black Friday."

BAG OF TRICKS

And that bag of tricks is changing by the minute.

Retailers such as Wal-Mart are offering special deals on their website on Thanksgiving, while many malls plan midnight openings for Thursday into Friday morning.

Mid-tier department store operator Kohl's Corp said on Thursday it will have deeper discounts on more products during the Black Friday weekend, while Limited Brands Inc -- whose main chains are Victoria's Secret and Bath and Body Works -- expects more promotions than planned.

To win sales earlier, CVS Caremark Corp's is holding a week-long promotion with deals on digital photo frames and MP3 music players.

Dollar General is starting its "Black Friday" sale this Sunday, with a Black & Decker coffee maker for $15. It will be open on Thanksgiving day, selling men's Wrangler jeans for $8.

Last year, the Black Friday weekend accounted for 10.1 percent of total holiday sales, according to ShopperTrak, up from 9.5 percent in 2006 and 9.3 percent in 2005.

Accenture's Hoffman said she will watch to see how much financing retailers offer to help shoppers buy big ticket items, such as flat-screen televisions.

She also expects consumers who can no longer afford to shop in upscale chains to look for luxury in different venues, such as off-price retailers.

"It's a great time for retailers to really make sure they know what their customer want to buy," she added.

"Those that don't are going to continue to see pressure on their earnings when they've got the wrong product at the wrong price in these challenging times."

(Editing by Andre Grenon)