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Holiday shopping season disappoints US retailers

NEW YORK--Sparse crowds at malls and “50 percent off” signs at The Gap, AnnTaylor and other stores give a clue as to how the U.S. holiday season is going.

This is shaping up to be the most discount-driven holiday season since the country was in a deep recession. It's also one of the most disappointing for stores.

Sales are up 2 percent to US$176.7 billion from the start of the season on Nov. 1 through Sunday, according to data obtained by The Associated Press from store data tracker ShopperTrak.

That's a slower pace than expected given that there are just days left in the season: ShopperTrak is forecasting that sales will rise 2.4 percent to US$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 when the country was in a recession, according to financial services firm BMO Capital Markets.

“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 yellow discount signs in front of their faces.

But all that discounting has had some unintended consequences. Retailers have learned as shoppers become immune to the deals, they have to continue to offer bigger discounts to get them in to stores.

That erodes sales since shoppers are spending less. It also eats away at stores' 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 of who are still dealing with stagnant wages and rising costs for things like health care.

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

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