Retailers Dreaming of a Gloomy Christmas

The holiday season is just around the corner, and retailers are making gloomy predictions for their fourth quarter sales. How does your holiday spending outlook size up to retailers' expectations?

This year, retailers may be singing the recession blues in lieu of Christmas carols. Listen closely while you're out shopping and you might hear songs like, "Oh Please Come and Shop All Ye Faithful," "Blue Christmas," and "Silent Shopping Night."

How are you planning to manage your holiday shopping this year? Most consumers say they're going to spend less, buy fewer gifts and do more shopping at discount retailers, like Wal-Mart.  If the sales figures reported by retailers for September are any indication, this spending pullback has already begun.

Depressed same-store sales

One of the metrics that retailers use to measure the health of their revenue trends is same-store sales. Also called comps, they measure the difference between sales in the current period, and sales in the same period of the prior year. In other words, same-store sales for August 2008 would be the percentage change between sales generated in that month, and sales generated in August 2007. Retailers have begun reporting these figures for September 2008, and the numbers are dismal. Abercrombie & Fitch, Gap, and Chico's reported same-store sales declines of 14 percent, 11 percent, and 15.6 percent, respectively. Other major chains experienced similar results.

The depressed retail environment is a symptom of a stagnant economy. Many consumers simply don't have the cash they did in prior holiday seasons. The stock market declines have left investors feeling more conscientious about their regular spending, while the credit crunch has reduced the availability of using other people's money. Add the rising unemployment and inflation to the mix, and it's no surprise retailers are suffering.

Savvy shopping as retailers struggle

A few of the national chain retailers, like Wal-Mart, have already communicated how they plan to deal with reduced holiday spending. Common strategies include putting holiday items on the shelves sooner, marking down popular gift items, and buying less stuff to sell.

Knowing this, you can make a few tweaks to your holiday shopping habits to make the most of your spending money. For example, don't wait until the last minute to do your shopping. Holiday sales are popping up earlier than ever this year; both Wal-Mart and Target have already announced pre-holiday markdowns on toys. And, since retailers won't be stocking as much inventory, the best items may be gone before December 24.

Consider moving down the retail chain for some of your shopping. Discount retailers Big Lots and Family Dollar have both recently reported sales increases, as they capture former mall shoppers who are feeling the pinch of a tighter economy.

Lastly, you can stretch your budget by shopping with cash instead of credit. If you must use credit, pay the balance off when you receive the bill.

If the sound of piped-in holiday music depresses you, remember to carry your iPod and headphones with you at all times.