Black Friday 2010: Outlook for season rises from ‘ho-hum’ to ‘ho-ho!’

Retailers are opening their doors on Black Friday 2010 to shoppers who appear to be more enthusiastic. But many people are sticking closely to their shopping lists.

By , Staff writer

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    Last year, the new JCPenney department store in midtown Manhattan had on its holiday finest, but sales were tepid. Retail analysts expect more shoppers out this year.
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Once the contentious elections ended, shopkeeper Linda Day noticed that her customers began to spend again.

"They are spending money on luxury items and buying cocktail dresses for parties," says Ms. Day, owner of Arabella's, a McKinney, Texas, emporium that sells clothes, jewelry, and shoes. "Two years ago, no one held parties."

Day says she believes the spending will continue right through the holidays. "People are happy to be shopping again," she says with Lone Star enthusiasm.

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Her optimism is not misplaced, say retail analysts. They predict that this holiday period, which begins the day after Thanksgiving (Black Friday), will be better than last year's, which was only ho-hum, and far better than 2008's, which was a disaster. Behind the improved outlook is some pent-up demand, a somewhat better consumer outlook, and a feeling among many people that their jobs are safe despite the 9.6 percent October unemployment rate.

"I think people are saying, 'As long as I have my job, I will keep it,' " says Bill Martin, founder of ShopperTrak, a Chicago-based retail analyst. "They feel they have a bit of a cushion, and we know that with cash in hand, people will go out and make a purchase."

If consumers do open up their wallets, it has important ramifications for the economy. Holiday spending sets the tone for retailers and the broader economy well into the following year, notes Mark Zandi, chief economist at Moody's Analytics Inc., in West Chester, Pa.

A good holiday season clears the shelves of inventory and encourages renewed production and hiring, says Mr. Zandi. Retailers themselves have been busy increasing their payrolls, adding 128,000 new jobs, or almost 15 percent of the total jobs created since last December.

"A bad holiday season will threaten the fragile economic recovery early next year," says Zandi.

It won't be hard to beat the past two years. In 2008, sales declined by 3.9 percent – the first decline since analysts started tracking retail sales in the 1960s, according to the National Retail Federation, a Washington trade group. Last year, sales rose a paltry 0.4 percent. This year, NRF predicts an increase of 2.3 percent.

The gains are expected to take place despite some significant obstacles, especially the fact that Christmas falls on a Saturday. This means a big shopping day, "Super Saturday," falls a full week before Christmas. Then another huge shopping day, the day after Christmas, will be on Sunday, a day when store hours are typically shorter. That's one reason that ShopperTrak is predicting the day will be only the ninth best day of the holiday season, compared with the third best last year.

"The calendar is a drain," says Mr. Martin.

Shoppers will also have a little less cash in their pockets this year because the price of gasoline is running about 26 cents a gallon higher than last year, according to AAA.

"This is like a tax increase. If you put more money into the gasoline tank, you have less money to spend on everything else," says Zandi, who calculates that if the current rise in gasoline prices were to last through the year, it would cost consumers $35 billion.

"That's roughly half the cost of providing the tax cut to the upper income group for one year," he says.

Even before the higher gasoline prices, shoppers were exhibiting different buying habits, Martin says. "When the shopper is going into the mall, they are going to fewer stores," he says. "This points to a very focused shopper, destination oriented, and not doing a lot of window shopping or impulse buying."

That's exactly what's happening at Arabella's. "They come in with a list," says Day. "It used to be if you sold a shirt, you easily could get someone to throw in a necklace or earrings, but not anymore. They are just going to buy one thing."

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