Transcripts

Holiday Shopping May Bring More Concern Than Happy Returns

SUSIE GHARIB: Sales of the season's hottest gift, Sony's Playstation 3, got off to a scorching start today. Would-be buyers who had waited in line for hours or, in some cases, days, swarmed stores at midnight and the video game consoles flew off shelves. With Sony promising just 400,000 systems for this nationwide launch, many retailers sold out quickly. Interestingly, analysts say these Playstations are selling for hundreds of dollars less than they cost Sony to build. The real profits will come from games, royalties, and peripheral products.

PAUL KANGAS: Those Playstations are just one of many electronic items that are expected to be hot sellers this holiday season. But while early forecasts suggest stores will ring up respectable sales this year, there are some concerns about the fortitude of the American consumer. Suzanne Pratt looks at the reasons why.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: In New York City, the Rockefeller Center Christmas tree is almost ready for its big debut and some stores along tony Fifth Avenue have gotten an early start in decking their halls. For the nation's retailers, that means only one thing. The do-or-die holiday season is here. Early forecasts suggest 2006 figures to be a fairly jolly holiday shopping season. After all, jobs are plentiful, the weather is mild, energy prices are down and the stock market is up.

DAVID RESLER, CHIEF ECONOMIST, NOMURA SECURITIES: There's no question, compared to last year, when we were facing higher energy costs and a cold winter, prospects of a cold winter, I think consumers are in a little better position for holiday spending this season than last season.

PRATT: The National Retail Federation expects a 5 percent increase in total holiday sales this year. While that's better than the annual average, it is below last year's result. Experts say the main problem this year is likely to be the low-end consumer. Even though energy costs have been falling, spending patterns among those shoppers are still suffering. The slumping housing market could also be a factor, leaving some consumers feeling less flush.

For retailers, it could mean another season of have and have-nots. Experts predict luxury stores will benefit from the strong stock market and department stores will draw more shoppers thanks to improved merchandise. Some discounters on the other hand, have been ringing up disappointing sales this fall, raising concerns about the holiday season. As a result, Wal-Mart has been aggressively cutting prices since mid-October, making it tough for competitors to stick with their pricing plans. Still, experts say all retailers are likely to benefit from the calendar.

KIM GREENBERGER, RETAIL ANALYST, CITIGROUP: This year, Christmas is on a Monday. We get a full Saturday and then Christmas Eve is Sunday, which is normally an abbreviated shopping day of the week anyway. So we think the calendar this year could add 1 to 2 percentage points to December sales.

PRATT: Another calendar fact likely to help retailers this holiday season is that there are 31 shopping days between Thanksgiving and Christmas. That's one more than last year. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.