Business Blog Posts

The electronics retailer, which was one of the biggest losers in 2010, drew in shoppers by being one of the companies that opened its stores at midnight Thanksgiving night, and unlike in 2010, it focused more on having lower prices for big TVs and other popular items.

"Last year, they weren't as responsive with their pricing as they needed to be. We are seeing a different set of behaviors from them this time around," Lawrence Creatura, a portfolio manager at Federated Clover Investment Advisors, said.

Overall, shoppers will have spent a record $52.4 billion, up 16.4 percent from 2011, from Thursday through Sunday, according to a survey for the National retail Federation, conducted by online research firm BIGreasearch.

Many retailers opened at midnight or earlier on Thanksgiving, pulling in younger people who were willing to stay up late for deals on electronics and toys instead of getting up before dawn on Friday.

"Consumers have finite cash. If you can be the retailer who gets that cash first, you are likely to be more successful in the holiday selling season," Creatura said.

Aside from Best Buy, analysts and investors also named Macy's Inc (M.N) and Wal-Mart Stores Inc (WMT.N) among those that were strong starters.

"Best Buy's success is partially due to locking in compelling exclusive deals, better than Amazon's (AMZN.O) and having unique in-store-only offers forcing the visit," Credit Suisse analyst Gary Balter said.

On the flip side, retailers that opened late or held the line on promotions failed to impress.

"Office supply seemed among the least busy as they opened later and had fewer high-profile deals than in years past," Balter said.

Retailers Gap Inc (GPS.N) and Sears (SHLD.O) also "need to step up," Craig Johnson, president of consulting firm Customer Growth Partners said, adding that he worries the two chains may be too late already as the "horse is out of the barn."

"We would be most cautious on Sears due to their cash flow and serious appliance competition," Balter said

The holiday shopping season that traditionally kicks off on Black Friday -- the biggest day of the year for retailers -- is closely watched by investors as consumer spending accounts for about 70 percent of the U.S. economy.

The National Retail Federation, an industry trade group, forecast a 2.8 percent increase in sales for the November-to-December holiday season, down from the 5.2 percent increase in 2010.

Despite the strong start, many remain skeptical if retailers will be able to maintain the sales momentum seen this weekend.

"One swallow does not a holiday season make. After the deepest recession in decades, the solid Black Friday weekend is welcome news, but we're only in the second quarter of a long playoff game," Johnson said.

(Reporting by Dhanya Skariachan; Editing by Brad Dorfman and Maureen Bavdek)

Germany's original plan was to try to secure agreement among all 27 EU countries for a limited change to the Lisbon Treaty by the end of 2012, making it possible to impose much tighter budget controls over the 17 euro zone countries -- a way of shoring up the region's defenses against the debt crisis.

But in meetings with EU leaders in recent weeks, it has become clear to both German Chancellor Angela Merkel and French President Nicolas Sarkozy that it may not be possible to get all 27 countries on board, EU sources say.

Even if that were possible, it could take a year or more to finally secure the changes while market attacks on Italy, Spain and now France suggest bold measures are needed within weeks.

As a result, senior French and German civil servants have been exploring other ways of achieving the goal, either via an agreement among just the euro zone countries, or a separate agreement outside the EU treaty that could involve a core of around 8-10 euro zone countries, officials say.

No firm decisions have yet been reached.

Reuters exclusively reported on November 9 that French and German officials were discussing plans for a radical overhaul of the European Union to establish a more fiscally integrated and possibly smaller euro zone.

"The Germans have made up their minds. They want treaty change and they are doing everything they can to push for it as rapidly as possible," one senior EU official involved in the negotiations told Reuters. "Senior German officials are on the phone at all hours of the day to every European capital."

While Germany and France are convinced that moving toward fiscal union - which could pave the way for jointly issued euro zone bonds and may provide more leeway for the European Central Bank to act forcefully - is the only way to get on top of the debt crisis, some other euro zone countries are unable or unwilling to move so rapidly toward that goal.

Not only Greece, Ireland and Portugal, which are receiving EU/IMF aid, but also Italy and Spain and some east European countries such as Slovakia, would either find it difficult under current economic conditions to meet the budget constraints Germany wants, or simply do not agree with the aim.

Consequently, the French and German negotiators are exploring at least two models for more rapid integration among a limited number of euro zone countries, with the possibility of folding that agreement into the EU treaty at a later stage.

TWO MODELS

One is based on the Pruem Convention of 2005, also known as Schengen III, a treaty signed among 7 countries outside the EU treaty but which was open to any member state to join and was later acceded to by 5 more EU states plus Norway.

Another option would be to have a purely Franco-German mini-agreement along the lines of the Elysee treaty of 1963 that other euro zone countries could also sign up to, officials say.

"The options are being actively discussed as we speak and things are moving very, very quickly," a European Commission official briefed on the discussions told Reuters.

One source said the aim was to have the outline of an agreement set out before December 9, when EU leaders will meet for their final summit of the year in Brussels.

Herman Van Rompuy, the president of the European Council, which represents EU member states, is supposed to deliver a preliminary report on treaty change at the summit. He has held extensive talks with EU leaders in recent weeks to gauge the feasibility of bringing about rapid treaty changes.

Sarkozy, who has made two speeches in the past two weeks highlighting the need for more rapid fiscal integration in the euro zone, and has acknowledged that it may be inevitable that a 'two-speed Europe' emerges, is due to make another keynote address on December 1 which could provide a platform for laying out in more detail the ideas that he and Merkel are developing.

A senior German government official denied there were any secret Franco-German negotiations, but emphasized that both countries saw the need for treaty change as pressing and were exploring how to achieve that in the best way possible.

"Germany and France are continuing to focus on proposals for a limited treaty change that can be presented at the EU summit in December," the official said, emphasizing that there was a need to act quickly to get changes in place.

Germany's Welt am Sonntag newspaper reported on Sunday that Merkel and Sarkozy were working on a new Stability Pact, setting out national debt limits, that could be signed up to by a number of euro zone countries and which would allow the ECB to act more decisively in the crisis.

"If the politicians can agree to a comprehensive step, the ECB will jump in and help," the paper quoted a central banker as saying.

The ECB has bought the bonds of euro zone strugglers in intermittent fashion when they have reached crisis point. Economists say it has to act much more radically to turn the market tide but the central bank, and Germany, has opposed any such move. Commitments to binding fiscal rules by euro zone governments may be the cover it needs to change tack.

"It would be a real disaster if this strategy which is in fact no strategy, this muddling through, were to continue for some months," Peter Bofinger, one of the five "wise men" who formally advise the German government on the economy, told Irish state broadcaster RTE.

"If this bond run is not stopped it will really endanger the stability of the European and even the global financial system. Bold action by the ECB is definitely needed."

Reuters reported a similar possibility on Friday, with euro zone officials saying that if much tighter fiscal integration could be achieved among euro zone states, it would give the ECB more room to maneuver and buy sovereign bonds.

BARGAINING PLOY?

While EU officials are clear about the determination of France and Germany to push for more rapid euro zone integration, some caution that the idea of doing so with fewer than 17 countries via a sideline agreement may be more about applying pressure on the remainder to act.

By threatening that some countries could be left behind if they don't sign up to deeper integration, it may be impossible for a country to say no, fearing that doing so could leave it even more exposed to market pressures.

"Some of this is just part of the posturing you hear -- it's pressure from Germany to go for treaty change as quickly as possible," the official involved in the negotiations said.

"To some extent you have to see these ideas as part of the bargaining chips that are being put on the table."

The risk for Merkel and Sarkozy is that if they do ultimately decide to push for a sideline agreement involving only 8-10 euro zone states, it would send a clear signal to the markets that the euro zone is split and that some countries are not seen as full members of the currency union.

That could either mean that some countries in the euro zone are left with fewer voting rights, even if they still use the euro, or it could mean that some countries decide, ultimately, that they would be better off without the euro -- a camp that officials say Greece, the crucible of the debt crisis, could fall into.

(Reporting by Luke Baker, Julien Toyer in Brussels, Carmel Crimmins in Dublin and Andreas Rinke and Gernot Heller in Berlin; Writing by Luke Baker, editing by Mike Peacock)

Echoing a Reuters report on Friday from Brussels, the Sunday newspaper said the French and German leaders were prepared to back a deal with other euro countries that might induce the ECB to intervene more forcefully to calm the euro debt crisis.

The newspaper report quoted German government sources as saying that the crisis fighting plan could possibly be announced by German Chancellor Angela Merkel and French President Nicolas Sarkozy in the coming week.

In an advance release before publication, Welt am Sonntag said that because it would take too long to change existing European Union treaties, euro zone countries should just agree among themselves on a new Stability Pact to enforce budget discipline - possibly implemented at the start of 2012.

It could be similar to the Schengen Agreement which applies to EU countries that choose to take part and enables their citizens to enjoy uninhibited cross border travel. Among the countries in the Stability Pact, there would be a treaty spelling out strict deficit rules and control rights for national budgets.

The European Central Bank should also emerge more as a crisis fighter in the euro zone, Welt am Sonntag wrote, saying that while governments cannot tell the independent ECB what to do, the expectations are clear.

"Based upon these measures, there should be a majority within the ECB for a stronger intervention in capital markets," Welt am Sonntag said. It quotes a central banker as saying: "If the politicians can agree to a comprehensive step, the ECB will jump in and help."

The ECB, which cannot directly finance governments, has been buying Italian and Spanish bonds on the open market since August to try to keep down borrowing costs for the euro zone's third and fourth largest economies.

Yields on Italian and Spanish debt have nonetheless climbed in recent weeks, despite the ECB intervention and the appointment of a new technocrat government in Rome and the election of the conservative Popular Party in Madrid.

In Brussels on Friday, euro zone officials said a push by euro zone countries toward very close fiscal integration could give the ECB the necessary room for maneuver to scale up euro zone bond purchases and stabilize markets.

France's Journal du Dimanche newspaper said reforms to Europe's economic governance would be the focus of a speech which Sarkozy will deliver in the Mediterranean port of Toulon on Thursday.

"The European Commission could take on supra-national powers," said one French presidency source, according to the newspaper, saying that Brussels would supervise the decisions of countries at risk of default, provided they request this.

"National parliaments will retain the initiative over the (policy) efforts to be made," one French negotiator told the paper.

The European Commission, the EU executive arm, put forward proposals on Wednesday to grant it intrusive powers of approval of euro zone budgets before they are submitted to national parliaments, which, if approved, would effectively mean ceding some national sovereignty over budgets.

Berlin, meanwhile, is pushing to change the European Union treaty so that a country could be sued for breach of EU budget rules in the European Court of Justice.

Le Figaro said there was resistance within Sarkozy's government to allowing France's budgets to be submitted for scrutiny by an "intergovernmental conference" in Brussels, but the president would seek to rally support for this.

A closer fiscal union could eventually pave the way for joint debt issuance for the euro zone, where countries would be liable for each others' debts.

Germany strongly opposes the joint issuance idea fearing spendthrift countries would piggyback on its low borrowing costs - meaning no gain for the virtuous and no pain for the sinners.

(Additional reporting by Jan Strupczewski in Brussels and Daniel Flynn in Paris; writing by Erik Kirschbaum; editing by Elizabeth Piper/Ruth Pitchford)

After featuring the usual deep discounts on Thanksgiving on Thursday and on Friday, retailers were still offering bargains on Saturday as holiday spending is expected to show only about half the growth of last year.

The holiday shopping season that traditionally kicks off on Black Friday - the biggest day of the year for retailers - is closely watched by investors as consumer spending accounts for about 70 percent of the U.S. economy.

Initial signs were encouraging. ShopperTrak, which measures retail traffic, estimated that sales rose 6.6 percent on Friday compared with a year earlier.

But in 2010 retailers also got off to a strong start to the holidays, only to see a sharp and quick falloff. The National Retail Federation expects holiday retail sales to rise 2.8 percent this year, down from 5.2 percent growth in 2010.

That means an even tougher battle for market share.

"Everybody is fighting for the same consumer," said Laura Gurski, a partner at management consulting firm A.T. Kearney.

Those consumers included Alison Shartrand, a Boston-based accountant who visited clothing retailer Aeropostale's store on Times Square. "I'm only going to shop if there are deals ... the cheaper the better," she said.

Aeropostale Inc, said on its website everything was 50 to 70 percent off in its "Saturday Blowout." At a Gap Inc store in New York's Times Square, everything at the clothing retailer was 60 percent off on Saturday.

"That's the name of the game now - promote, promote, promote," said David Bassuk, managing director of consultancy AlixPartners LLP. "They've got to keep it coming."

STRIKING THE RIGHT BALANCE

Neighborhood shops - often undercut and overwhelmed by big chain stores and warehouse clubs - showcased their own efforts during "Small Business Saturday" promoted by American Express and others. President Barack Obama was among those shopping at local shops in Washington.

The hunt for bargains turned ugly at some stores on Friday.

One of the most outrageous incidents was at a Walmart store in the Los Angeles area, where up to 20 people were hurt when a woman used pepper spray to get the edge on other shoppers rushing for Xbox game consoles. She turned herself in to police on Saturday.

The tough economy, coupled with smart phones that allow for fast comparison of prices, mean the pressure to offer consumers something special and affordable is intense.

"We have put together an entire promotional program for the whole season so we don't shoot all our bullets on the day after Thanksgiving," Jamie Brooks, senior vice president of retail services for Sears Holdings, told Reuters on Friday.

Deep discounts alone may not be enough.

The Black Friday campaign by department store chain Macy's Inc featured an ad with teen singer Justin Bieber and exclusive products will be a focus of its holiday promotions.

Retailers are also trying to strike the right balance between not having too much inventory that must later be sold at profit-draining discounts and making sure they do not anger customers by running out of popular items.

"The most important thing to our customers is when we see something in an ad and come into the store, we have to have it," said J.C. Penney Co Inc executive Mike Thielmann.

Online shopping soared on both Thanksgiving and Black Friday, suggesting that Cyber Monday - the biggest online shopping day of the year - could be a banner day for retailers with the right mix of discounts, special offers and the now commonplace free shipping.

IBM Smarter Commerce, a software and services company for retailers, said online sales rose 39.3 percent on Thanksgiving and 24.3 percent on Black Friday, with robust growth in searches and sales on mobile phones and tablets.

(Reporting by Phil Wahba in New York and Jessica Wohl in Chicago; Additional reporting by Dhanya Skariachan and Mihir Dalal in New York; Editing by Philip Barbara and John O'Callaghan)

American Express (AXP.N) is teaming up with FedEx Corp (FDX.N) and other so-called Big Business companies to promote the second annual "Small Business Saturday," which seeks to drive more purchases at small, local businesses, like bakeries, clothing and accessories retailers and bars.

The event falls between Black Friday, the day after Thanksgiving and the traditional start of the U.S. shopping season, and the Cyber Monday shopping frenzy three days later, which are important for big chain stores and online retailers.

It is aimed at people who may prefer to patronize their local stores than fight off frenzied and sometimes violent shoppers. This year's Black Friday was marked by an incident in which a consumer used pepper spray on rivals at a Wal-Mart store.

Unlike Wal-Mart (WMT.N), which generated roughly $419 billion in sales last year, the businesses targeted on Saturday have a maximum of $100 million in annual sales, with many doing less than $10 million.

"I don't do lines for shopping and I don't do crowds. I'd have to get paid to do that," said Alex Pulido, a Toyota engineer from Hermosa Beach, California.

"I'm not a fan of department stores because there is too much going on there. I'm definitely supporting the local businesses," said Pulido, while shopping at Chubby's Cruisers, a local bicycle store in Culver City, California that was done up with balloons and banners urging shoppers to "Shop Small."

The store, filled with people, offered discounts ranging from 10-15 percent.

Jeff Stibal, the chief executive of Dun & Bradstreet Credibility Corp, said local stores fulfill some shopper needs that big retailers typically overlook.

"Small businesses offer personalized attention and cater much better to local needs apart from offering small discounts and being good for their communities. Your neighbors work at these stores," said Stibal, whose company rates the credit-worthiness of small firms.

Small businesses, which account for a majority of new hiring, were hammered by the U.S. credit crisis but things have improved since with more financing available.

ATTENTIVE TO SHOPPERS

Susan Root and Chris Hart from the upscale town of Belmont, Massachusetts, were among those who went shopping at the Belmont Center, where local stores were bustling with activity on Saturday.

"I like the level of attention you get, and I like going in and knowing the people who work there and building a relationship," said Root at Marmalade, which sells a range of knickknacks from candles and cards to raw honey and tablecloths.

Root and Hart purposely came out to support their local stores on Saturday.

Store manager Lauren Pazzaneze said local businesses shop at each other's stores even if cheaper deals are available at malls.

President Barack Obama also patronized smaller stores on Saturday. Obama visited a local bookstore with daughters Malia, 13, and Sasha, 10, in the diverse, upscale Dupont Circle area of downtown Washington.

"This is 'Small Business Saturday,' so we're out here supporting small businesses," said Obama, standing next to Malia who was hugging an armful of books.

Amex is giving $25 free credit to some customers who shell out $25 or more at designated local businesses on Saturday after offering $100 worth of free ads on Facebook to 15,000 business owners.

Local business owners and associated organizations like Dun & Bradstreet and SnapRetail, are using social media sites like Facebook, Twitter and Groupon (GRPN.O) to build awareness and enthusiasm about the virtue and utility of "shopping small."

(Reporting by Toni Clarke in Belmont, Malathi Nayak in Culver City and Mihir Dalal in New York; Editing by Paul Simao)

(This story was corrected to fix the name of the city in paragraph 6)