Early start to leave retailers seeing red

US retailers will kick off holiday shopping earlier than ever this year on a day analysts have dubbed "Red Thursday" as stores prepare to sell some discounted items at a loss in a battle for consumers.

Holiday shopping traditionally begins the day after Thanksgiving on Black Friday, so named because it was when retailers historically moved from the red into the black and became profitable for the year.

But now that has changed. In a fragile post-crisis economy where ecommerce is booming, retailers such as Walmart, Best Buy and Macy's have become so desperate to woo consumers that they are discounting their Christmas wares earlier and more aggressively than ever.

Selling a few items at a loss does not mean retailers will plunge into the red overall, but Retail Metrics, a research group, says earnings at the 120 retailers it follows are forecast by analysts to rise by just 2.2 per cent year on year in November, December and January.

The expected earnings growth has dwindled gradually since July - when analysts were forecasting 10 per cent growth year on year for those three months - as retailers have made their willingness to sacrifice profits for sales increasingly clear.

"When you see a precipitous decline like that, it usually is the discounting," said Ken Perkins, president of Retail Metrics. In the same period last year retailers' earnings increased by 11.8 per cent from the previous year.

The long weekend that begins with Thanksgiving accounts for about 10 per cent of total retail sales in November and December, according to analysts at Cowen & Co.

The phrase "Red Thursday" was coined by Gary Balter, retail analyst at Credit Suisse, who said that by opening early on the evening of Thanksgiving retailers were shifting losses that would have come on Friday into Thursday.

Toys R Us, the toy store, is opening at 5pm on Thanksgiving, and Best Buy, the electronics chain, is opening at 6pm. The department stores Macy's, JC Penney and Sears are opening at 8pm, as is Target, the style-oriented discount chain.

Target has come up with one of the season's most eye-catching deals by offering the iPad Air for $479 - $20 below its normal price - plus a $100 gift card. Such gift cards enable retailers to circumvent manufacturers' restrictions on discounting.

Most Walmart stores have been open all day on Thanksgiving for years, but the company is unveiling its holiday discounts this year at 6pm and 8pm on the day rather than waiting until Friday. On a New Jersey store tour for journalists last week, the deals it highlighted included a 32-inch Funai television for $98 and the board game Monopoly for $5.

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Retailers' "Red Thursday" discounts will have been planned carefully, but profitability often takes the biggest hit later in the season when retailers are forced into big unplanned discounts to offload products that have flopped.

"Someone's going to miscalculate and figure out around December 20 that they've got too much," Mr Balter said.

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