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Despite discounts, holiday sales lower than expected

A “triple doorbuster” sale sign is placed at the toys section in Kmart during Grey Thursday shopping late November in New York. (Associated Press)
Anne D’Innocenzio Associated Press

NEW YORK – Sparse crowds at malls and “50 percent off” signs at The Gap and other stores offer clues as to how this holiday season is shaping up so far: It’s the most discount-driven one since the U.S. was in a deep recession. It’s also the most disappointing for stores.

Sales are up 2 percent to $176.7 billion from Nov. 1 through Sunday, according to data provided to the Associated Press from store data tracker ShopperTrak. That’s a slower pace than expected with days left in the season. ShopperTrak predicts sales will rise 2.4 percent to $265 billion for the two-month stretch that’s typically the busiest shopping period of the year.

The modest growth comes as the amount of discounts that stores are offering this season is up 13 percent from last year – the highest level since 2008, according to financial services firm BMO Capital Markets, which tracks 20 clothing stores.

“The holiday season has been marginal to just OK,” said Joel Bines, managing director and co-head of the retail practice at AlixPartners. “Retailers are doing anything they can to get rid of merchandise.”

The data underscores how aggressive discounting has been both a blessing and a curse for retailers. Since the recession, the only way to get Americans into stores has been to flash huge discount signs in front of their faces.

But the discounting has had unintended consequences. Shoppers become immune to the deals, so retailers must offer bigger discounts to keep them coming into stores. That erodes retailers’ sales since shoppers aren’t buying things for regular price. It also eats away at retailers’ profit margins.

Still, analysts say retailers have created a cycle of constant discounting that they’ll have to continue in order to attract U.S. shoppers, many who are still dealing with stagnant wages and rising costs for things like health care.

But the sales so far have not attracted as many shoppers as retailers had hoped. ShopperTrak, a Chicago-based firm that tracks data at 40,000 stores across the country, said the number of shoppers from Nov. 1 through Sunday dropped 16.5 percent compared with the same period a year ago.

Still, ShopperTrak is sticking to its growth forecast. Bill Martin, ShopperTrak’s co-founder, reasons that six of the season’s top 10 spending days still are left. And he estimates that the week before Christmas accounts for up to 15 percent of holiday business. “The good news is that there are still some big days left,” Martin said.

The National Retail Federation, the nation’s largest retail group, also is standing by its forecast that sales in stores and online combined will be up 3.9 percent to $602.1 billion.

Still, online spending even is behind predictions. Online spending from home and work desktop computers in the U.S. from Nov. 1 through Sunday was up 9 percent from the same period last year to $37.8 billion, according to comScore. But the Internet research firm still expects online sales to meet or slightly surpass its 14 percent growth forecast.