As shoppers stay away, stores ready to return to deep discounts

When it comes to fat holiday discounts, better late than never.

This shopping season, many stores haven't been offering the blockbuster deals that they had in years past. Instead, they've dangled offers of free shipping and no-fee layaways to lure shoppers.

But in the final weekend before Christmas, shoppers should expect to see more "70 percent off" and "buy one, get one free" signs as stores try to salvage a season that has been disappointing.

Teen retailer Aeropostale has slashed prices on everything in its stores by 60 percent. Rival American Eagle Outfitters is offering 40 percent off all purchases. Saks Fifth Avenue is cutting prices on some designer clothing up to 60 percent. And clothing chain Children's Place is offering up to 75 percent off on its website.

The discounts are aimed at luring people like Jennifer Romanello of Rockville Centre, N.Y., a former publishing executive who was laid off in June. She is planning to spend $400 less on holiday gifts this season than she spent a year ago, she said, and will be looking for deep discounts when she heads to stores this weekend.

"I just want to be cautious," said Romanello, 47, who has two children, 12 and 15. "If it's a great deal, I will consider."

Discounting may be good news for shoppers, but it can hurt stores, whose profits likely will suffer in the last-ditch effort to boost sales during the holidays, when they can make up to 40 percent of their annual revenue.

To be sure, stores have offered discounts throughout the season, but they resisted the blockbuster deals that ate away at profits last year. In fact, promotions and other discounting efforts were down 5 percent through Dec. 10 compared with last year, according to BMO Capital Markets, which tracks promotions at about two-thirds of mall stores. But sales have been slow, so stores will have to rely on the final days before Christmas to make up the difference.

Many shoppers continue to be weighed down by concerns about their financial future. Some have concerns about the weak U.S. job market. Others worry about the possibility that a stalemate between Congress and the White House over the U.S. budget could trigger tax increases and spending cuts that would mean less money in their pockets.

Wal-Mart CEO Mike Duke said in a speech in New York last week that a recent poll of shoppers at the world's largest retailer found that an overwhelming majority were aware of the threat of higher taxes, leading some to cut back on holiday buying. And consumer confidence fell sharply this month, according to a survey by the University of Michigan, partly because of such concerns.

A quirk in the calendar means the holiday season is four days longer than a year ago and includes a full weekend right before Christmas. That, too, may be tempting shoppers to wait longer to buy gifts.