After charging out of the gate on Black Friday weekend with promotions, events and giveaways, merchants are hoping that cold weather and markdowns build sales.
In addition to coping with nationwide trends of high fuel prices, diminishing home values and tight credit, stores are getting fallout from a severe drought in Georgia that has wreaked havoc on agriculture and related businesses, and balmy temperatures that lasted deep into November, hurting fall sales and leaving retailers with an excess of inventory going into holiday.
"Savvy retailers were smart to capture the momentum that's left in the third quarter with heavy discounts and more ad spending because it may be a weak finish," said Jeff Humphreys, director of economic forecasting at the University of Georgia's Terry College of Business, who predicted a 3 percent same-store sales increase for the Southeast. "With the economy at the tipping point of a recession that could start the first quarter of next year, consumer confidence is low."
The impact of the housing market's tumble varies. For example, Georgia, Tennessee and North Carolina, where prices and sales have been relatively stable in recent years, are faring better than the Florida market, where declines are among the highest in the nation.
"Florida real estate is in free-fall," said Mark Vitner, senior economist for Wachovia, who said tourists, especially wealthy visitors from abroad, were keeping luxury markets afloat in South Florida.
For Florida, Vitner projects overall holiday sales gains of 2 percent, while projecting Atlanta's sales gains at 5 percent. In the Carolinas and Tennessee, where cities like Raleigh and Nashville have more robust economies, he forecast 6 to 7 percent gains.
Two Atlanta bellwethers, the Lenox Square and Phipps Plaza malls, both owned by Indianapolis-based Simon Properties Group, appear to be holding their own.
"Retailers...are happy to be meeting expectations," said Dewayne Herbert, area director of marketing for Lenox Square and Phipps Plaza. "Everybody's aware of the bad news reports and are working to capitalize on sales early, with discounts, coupons and shopping passes."
He projected overall holiday sales would be flat to slightly higher than last year.