Shop ’til you Drop

The early results are in and I am pleased to report that the patient is not just alive, but pretty darned feisty! The American consumer came through over the first big weekend of the holiday sales season, although experts are still on pins and needles to see how we will perform for the next 28 days until Christmas Day.

Perhaps you are wondering why there is so much fascination with this one weekend and why special terms, like “Black Friday” (named for the day on which retailers traditionally become profitable on the year, or “go into the black”) and “Cyber Monday” (the Monday after Thanksgiving when on-line shopping cranks up dramatically), have entered the American lexicon. Retailers’ performance over the Thanksgiving weekend is closely watched because it accounts for up to 8%, or roughly $40 billion, of all holiday sales, which are expected to reach $475 billion this year, according to the National Retail Federation.

While every holiday season is important, 2007 seems more crucial than usual. The reason is that uncertainty is shaking the confidence of investors and consumers alike, as the flow of concerns like the continuing housing recession; the credit fall out from the sub-prime mortgage fiasco; and spiking energy prices are fraying even the steadiest of nerves. As a result of all of those issues, it is expected that retail sales growth this season will be the weakest since 2002, the third year of a disastrous bear market.

When the early results came in, there were was some good news and some bad news. First the good news: according to the research firm ShopperTrak, retail sales rose 8.3% on Friday compared with last year, the biggest increase in three years. On Friday and Saturday combined, sales rose 7.2%, which was a nifty feat in the face of the negative news coursing through the mainstream media. However, it looks like this season consumers are not exactly splurging.

Shoppers sought bargains and spent an estimated $348 each over the 2007 Thanksgiving holiday weekend, down from $360 last year, a survey conducted for the National Retail Federation found. But here is something that you might not read about—the year before—2005, when the housing market was still booming, the average was $303. I don’t want to be too rosy, too early, but I am impressed that the news was as good as it was. With 28 days to go (and one Federal Reserve meeting sandwiched in between), it will be interesting to see whether consumers can maintain their early pace or succumb to the wall of worry they see ahead.