“I was a former ‘spend-aholic,’’’said Anwar, 29. “Now, I want to make sure I have the money before I spend it.”
It’s a problem that retailers know all too well. Since the recession began in late 2007, stores have had to offer financially strapped Americans ever bigger price cuts just to get them into stores. But those discounts eat away at profits.
So far, Wal-Mart, Target and Kohl’s are among more than two dozen major chains that lowered their profit outlooks for either the quarter or the year. A big reason is the expectation that they’ll have to offer huge discounts in order to get shoppers to spend.
There are already signs that retailers are aggressively discounting. Wal-Mart, for instance, on Friday started matching or beating the prices that certain competitors like Best Buy are advertising for some toys and electronics for the day after Thanksgiving — known as Black Friday. Best Buy also plans to match rivals’ prices, even after customers have purchased items. And Target, better known for its whimsical advertising, is touting its prices in holiday TV ads for the first time in at least a decade.
The tempered expectations, earlier discounting and lowered profit outlooks from retailers come even though there are indications that the economy is recovering. The job market is making strides. The housing market is starting to come back. And the stock market keeps hitting new highs. All that would ordinarily lead Americans to spend more.
But so far, those improvements haven’t been enough to shore up consumer confidence. In fact, Americans’ confidence in the economy is at its lowest level since April.
“Stores know that they are well into a fight,” said Ken Perkins, president of the research firm RetailMetrics. “The vast majority of consumers are distressed.”
Retail sales were up 0.4 percent in October, after being flat the previous month, according to the Commerce Department. Americans spent on big ticket item such as cars and furniture, but that may have left them with less room for more discretionary items like clothing this holiday season.