Retailers will struggle to win tax rebate sales

By Nicole Maestri - Analysis

NEW YORK (Reuters) - Eagerly awaited tax rebates will begin reaching consumers on Monday, but struggling retailers may only get a small boost from the stimulus checks as shoppers use the extra cash to pay down debt, or cover basic expenses, like gas and food bills.

The U.S. Treasury Department is accelerating its schedule for distributing the checks, which are part of its $152 billion 2008 economic stimulus package. Payments totaling more than $100 billion should be mostly in consumers' pockets by the end of June, with the first payments arriving next week instead of in early May.

Retailers are eyeing the rebates as a means to boost business as the slowdown in consumer spending has battered their sales and profits.

But the rebates will mainly be going to individuals with taxable incomes of less than $75,000 and couples with taxable income below $150,000 -- the consumers most affected by higher food prices, rising energy costs, the prolonged housing market slump, the credit crunch and a weakening job market.

Instead of splurging on furniture, jewelry or a big-screen TV, those beleaguered shoppers may use the rebates on basics like gas, groceries and bills.

"Consumers are so focused on getting their own financial houses in order," said Britt Beemer, chairman of America's Research Group, which tracks consumer behavior. "You're seeing a lot of consumers act very responsibly, and say, 'I'm not going to spend this money.'"

FREE GROCERIES WITH THOSE TAX REBATES

The rebates pay up to $600 for individuals and $1,200 per married couple. An additional $300 per child will go to families with children.

"The money's going to help Americans offset the high prices we're seeing at the gas pump and the grocery store and it will also give our economy a boost to help us pull out of this economic slowdown," U.S. President George W. Bush said on Friday.

Retailers have devised ways to get shoppers to spend the cash in their stores.

Office supply retailer Staples Inc (SPLS.O) has launched the "Staples Economic Stimulus Center" on its Web site, providing information about tips to find savings.

Sears Holdings Corp (SHLD.O) will offer a 10 percent bonus if customers convert their entire stimulus check into a Sears or Kmart gift card. For instance, if the check is $600, Sears will give consumers gift cards totaling $660.

"Things are tight right now, so people are having to look really hard at value," said Kevin Brown, vice president of marketing services for Sears Holdings.

Retail food chains Kroger (KR.N) and Supervalu Inc (SVU.N) will allow customers to exchange their stimulus check for a store gift card loaded with extra money.

STIMULUS CHECKS HIT AS CONSUMER CONFIDENCE AT 26-YEAR LOW