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Associated Press
Kmart used “triple doorbuster” sale signs to lure shoppers to the toy section of this New York store on Thanksgiving. Despite heavy discounting, retail sales so far this holiday season are up a modest 2 percent over last year.

Holiday sales disappointing

Heavy discounting fails to stir more than modest growth

– Sparse crowds at malls and “50 percent off” signs at The Gap, Ann Taylor and other stores give a clue as to how the holiday season is going.

This is shaping up to be the most discount-driven holiday season since the country was in a deep recession. It’s also one of the most disappointing for stores.

Sales are up 2 percent to $176.7 billion from the start of the season on Nov. 1 through Sunday, according to data obtained by the Associated Press from store data tracker ShopperTrak.

That’s a slower pace than expected, given that there are just days left in the season: ShopperTrak is forecasting that sales will rise 2.4 percent to $265 billion for the two-month stretch that’s typically the busiest shopping period of the year.

But the amount of discounts offered by stores this season is up 13 percent from last year – the highest level since 2008 when the country was in a recession, according to financial services firm BMO Capital Markets, which tracks 20 clothing stores.

“The holiday season has been marginal to just OK,” said Joel Bines, managing director and co-head of the retail practice at AlixPartners. “Retailers are doing anything they can to get rid of merchandise.”

The data underscore how aggressive discounting has been both a blessing and a curse for retailers. Since the recession, the only way to get Americans into stores has been to flash huge yellow discount signs in front of their faces.

But that discounting has had some unintended consequences. Retailers have learned that shoppers become immune to the deals, so they have to continue to offer bigger discounts to get them to come into stores.

That erodes retailers’ sales, since shoppers are spending less. It also eats away at retailers’ profit margins. Still, analysts say, retailers have created a cycle of constant discounting that they’ll have to continue in order to attract U.S. shoppers, many of whom are still dealing with stagnant wages and rising costs for expenses such as health care.

So stores are rolling out more discounts to try to attract last-minute shoppers. The number of promotional emails that seven major retailers, including Wal-Mart and Target, sent for the 13-day period that ended Sunday was up nearly 70 percent from the same period last year, according to Market Track, which tracks discounts.

And Toys R Us is throwing in extra discounts that weren’t initially planned for Saturday, which is typically the season’s biggest sales day. Toys R Us spokeswoman Kathleen Waugh called the season “hyper competitive” and said the retailer is cutting prices on popular toys. For instance, Hasbro’s Furby Boom, a furry robotic electronic pet, is being reduced to $39.99, down from $59.99.

But the sales so far have not attracted as many shoppers as retailers had hoped. ShopperTrak said the number of shoppers from Nov. 1 through Sunday was down 16.5 percent compared with the same period a year ago.