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Come, all ye frugal

The Baltimore Sun

Nkeng Bailey is determined to give her son and daughter a nice Christmas, but she knows she'll have to make some sacrifices in these tough economic times, such as buying an acoustic guitar for her son instead of the more expensive electric one.

Last week, the 33-year-old geriatric nursing assistant loaded a cart at Kmart with board games, teddy bears, a football and dolls. Then she put all the gifts on layaway to help her better manage holiday spending and "make sure we can still eat and I can keep the heat on."

"Usually I go out and get everything," said Bailey, who lives in Baltimore. "But not this year. Everything is really tight. You have to budget and plan your finances, and you may have to sacrifice and not buy some things you want but don't really need."

Plenty of consumers feel the same anxiety, leaving the nation's retailers desperate to get them to spend. The federal government confirmed those worries Friday, reporting a record drop in retail sales for October.

Consumer confidence is at its lowest level in 40 years. Making matters worse for retailers, the traditional shopping season is five days shorter than last year because Thanksgiving occurs so late.

To lure shoppers, retailers are pushing holiday promotions earlier than ever; they're already offering extended store hours and steep cuts on items such as toys. In recent years, holiday advertisements began to appear before the Halloween candy is sold out, but the big shopping season has crept even earlier this year as retailers grapple with the economic downturn.

Wal-Mart led the way for holiday bargains by slashing the price on toys well before Halloween. The world's largest retailer also announced it will alert shoppers about holiday deals through text-messaging.

Other retailers have also launched sales and discounts traditionally pegged to the day after Thanksgiving, the typical start of the holiday season. Kmart began hosting "Black Friday Weekends" two weeks ago. Stores such as Kohl's and JCPenney have extended hours to midnight on some days, another shopping tradition once reserved for after Thanksgiving.

Retailers are also appealing to consumers with marketing campaigns and other programs that promote ways to stretch a budget or save a few dollars. "Gifts That Fit Your Budget Beautifully," reads one Kohl's tagline. Sears will begin offering layaway today after seeing how cash-strapped customers have responded to it at a sister company "Retailers need to do everything they can to get to the consumer early," said Margo Georgiadis, executive vice president and chief marketing officer for Discover Financial Services.

For some retailers, it's a fight for survival. Many stores will be forced out of business because of weak consumer spending, analysts predict. Circuit City and Boscov's department stores are among those that have been forced to declare bankruptcy. Liquidation sales at stores such as Tweeter and Linens 'n Things might put even more pressure on other retailers.

The National Retail Federation says the holiday season, when most retailers ring up the bulk of their sales for the year, will be the worst since 2002.

The trade group predicts that holiday sales will increase 2.2 percent to $470 billion, well below the 10-year average increase of 4.4 percent. That's the slowest growth since 2002, when sales rose 1.3 percent. The International Council of Shopping Centers predicts a 1.7 percent sales increase.

October sales figures show that consumers are holding on tightly to their cash - and the problem might be worse than retailers thought. Best Buy Co. cut its earnings forecast last week, saying changes in consumer behavior were "seismic" and created "the most difficult climate" the company had seen in its 42-year history. Macy's warned that the holiday season would be "a nail-biter."

Monica Stein, 38, is one of many shoppers planning to buy fewer gifts this year. Her family has decided to buy only for the children. The stay-at-home mother began shopping last month and will parcel her spending to avoid a huge credit card bill in January. She has taken advantage of the early sales, buying clothes at Old Navy and toys at Wal-Mart.

"We're definitely cutting back this year," said Stein as she shopped recently at Kohl's in Timonium with her 2-year-old son, Ryan. "It seems like all of our bills go up, but the paycheck remains the same."

Mamie Rader, a 57-year-old nurse who lives in Timonium, said the economy has made her nervous, even though it has had a minimal effect on her lifestyle. She took advantage of a rainy day recently to do what she called "Christmas browsing" at Kohl's. The knitter said she'll give away more handmade gifts this year and is looking for bargains. She also plans to cut out unneeded gifts to adults and instead will buy for a needy family.

"I'm thinking more about why I'm shopping and what I'm spending," Rader said as she looked at photo frames. "I'm being less frivolous."

The Timonium Kohl's was filled with the holiday spirit last week. The store expanded its toy section and had displays of holiday gifts with "Present Perfect" signs hanging above them. Decorations were discounted as much as 50 percent and Christmas trees were on display.

Retailers are trying to come up with ways to help customers like Stein and Rader manage their money. Kmart has always had layaway but began advertising it this year. At the store on Wabash Avenue in Northwest Baltimore, the manager has added more staffing and increased storage space to keep up with the demand.

"Shoppers [in focus groups] told us they needed to be able to shop earlier than in the past to better manage their budgets," said Tom Aiello, a spokesman for Sears Holding Corp. "They felt if they were forced into last-minute decisions, they were going to go over budget."

Kohl's has been open until midnight Fridays and Saturdays since Nov. 7 and has "power hours" when consumers can find the steepest discounts; it will continue the extended hours throughout the season. JCPenney will have its second midnight closing Nov. 22 for a sale. Kmart will continue offering holiday discounts and specials throughout the season as well.

"We are offering greater discounts more frequently and earlier in the season to provide ample opportunity for the customer to stretch their budget," said Kohl's spokeswoman Kristen Cunningham.

It is unclear whether the early efforts are driving shoppers to buy, because retailers don't release those sales figures. It's certainly unlikely to turn the season around.

A recent survey of chief marketing officers at leading retailers found that 39 percent expected sales to decrease and 41 percent expected sales to be flat. Only 20 percent expected sales to increase, according to the survey done by accounting and consulting firm BDO Seidman.

Analysts said retailers have no choice but to discount early. Many are still trying to get rid of fall and back-to-school inventory. Others are hoping to improve sales volume.

"They know they're going to have to bring in people over a longer period of time," said Ted Vaughn, a partner in the consumer products industry group at BDO Seidman. "A shopper that doesn't have credit will find it easier to buy two shirts at a time over several trips then 10 at once."

Retail experts don't expect the early sales to dampen the frenzy of Black Friday - the nickname for the day after Thanksgiving because it was long responsible for putting merchants' ledgers in the black. Many shoppers will come out of tradition. Some shoppers will wait until the end of the season in hopes that discounts will become steeper, some analysts say. Others won't be able to afford to shop any earlier.

"Some will have to wait for that last paycheck," said Ken Perkins, president of Retail Metrics, which tracks spending patterns. He predicts it could be the most price-conscious holiday season since the 1980s. "Shoppers are really stretched this year. A lot of consumers will be forced to wait."

Mozelle Holley, 57, who owns an assisted-living home in Baltimore, was shopping for toys at Kmart recently. She put back a Playskool toddler ride-along toy for another brand that was $7 cheaper. She's watching her money closely this year because of rising expenses, including home heating costs.

Holley is helping to buy Christmas gifts for five grandchildren this year, but they'll get three toys apiece as opposed to eight to 10 in previous years.

"It's rough this year," she said. "The economy is not good. We're cutting everything back."

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