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Shoppers’ frugality hurts retailers’ bottom line

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NEW YORK — Shoppers who waited until the final days before Christmas were rewarded with big bargains and thinner crowds. But their strategic deal hunting reflects why stores may not ring up the sales they had hoped for.

Analysts expect growth from last year to be relatively modest. Several factors have dampened shoppers' spirits, including fears that the economy could fall off the "fiscal cliff," triggering tax increases and spending cuts early next year.

On Christmas Eve, Taubman Centers, which operates 28 malls across the country, reported a "very strong weekend," with shoppers taking advantage of the sales. But many last-minute shoppers said they were spending less than they did last year and taking advantage of big discounts ranging from 30 percent to 70 percent off.

Kris Betzold, 40, of Carmel, Ind., was out at the Fashion Mall at Keystone in Indianapolis on Monday looking for deals on toys, and said she's noticed the sales are "even better now than they were at Thanksgiving." But she said the economy has prompted her and her husband to be more frugal this year.

"We under budgeted ourselves by $400 for Christmas because we just wanted to put that money back in savings," she said.

Dianne Ashford, 40, who works for a film production company and was at the Lenox Square Mall in Atlanta on Monday, said she was spending $500 on gifts this year, down from the $1,000 she normally spends.

"Times are hard," said Ms. Ashford, who was finishing up shopping on Christmas Eve because she has been working six days a week. The best deal she found this year was a guitar for her mother, half off at $79

Other last-minute shoppers said they were holding off as much as possible for even bigger post-holiday sales.

Chris Ailes, 37, a TV producer, was at the Lenox Square Mall to pick up some last-minute gifts for his mom and grandmother. But with the economy so shaky in recent years, he and his family have talked about cutting back on spending, even though they all have jobs. It was Christmas Eve and he already was thinking about the discounts that would soon follow.

"That's when the sales are going on," he said.

At Macy's in New York, Maureen Whyte had a similar game plan in mind. Ms. Whyte, 33, who works for an insurance company, was picking up some stocking stuffers for her children. For some toys, however, she was holding off for the post-Christmas sales and said her children understood why.

"I told them, 'Whatever Mommy didn't get you, you'll get after this week,"' she said, noting that her 5-year-old and 10-year-old are fine waiting as long as they know they eventually will get their toys.

That's grim news for retailers, with many counting on the holiday shopping season for as much as 40 percent of their annual sales. Although the week after Christmas is considered part of the season as well, by that time retailers are backed into a corner because it's their last chance to get rid of items that have been sitting on shelves for months. The steep discounts during that time mean sales are less profitable.

ShopperTrak, which counts foot traffic and its own proprietary sales numbers from 40,000 retail outlets across the country, on Wednesday cut its forecast for holiday spending down to 2.5 percent growth to $257.7 billion, from prior expectations of a 3.3 percent rise.

Online, sales rose just 8.4 percent to $48 billion from Oct. 28 through Saturday, according to a measure by MasterCard Advisors' SpendingPulse. That is below the online sales growth of 15 percent to 17 percent seen in the previous 18 months, according to the data service, which tracks all spending across all forms of payment, including cash.

Marshall Cohen, chief research analyst at the market research firm NPD Inc., said retailers will have to be more aggressive than usual with discounts on the days after Christmas to get shoppers to spend. That could mean some stores will slash prices by as much as 80 percent to clear inventory and make shoppers believe sales are a "once in a lifetime opportunity."

"Consumers are going to be rewarded for waiting until after the holidays," he said.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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