Retailers are expected to increase discounting in the final days before Christmas after a late-buying binge failed to materialize during the last weekend before the holiday. And that's fueling worries...

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NEW YORK — Retailers are expected to increase discounting in the final days before Christmas after a late-buying binge failed to materialize during the last weekend before the holiday. And that’s fueling worries that industry profits could be hurt in the fourth quarter.

“You will really see some dramatic desperation discounting” this week, said Burt Flickinger III, managing partner at Strategic Resource Group, a New York-based industry consultant. He estimated profit margins will be cut by 3 to 5 percent in the fourth quarter as a result.

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Merchants needed a hefty sales surge this past weekend to recoup lost business after seeing a slow start to a holiday selling season that never gathered steam. Now, they’ll have to rely even more heavily on procrastinators during the final days before Christmas and post-holiday sales — expected to be boosted by the redemption of gift cards — to meet their holiday sales forecast. Gift cards are only recorded as sales when recipients redeem them.

ShopperTrak, which tracks sales at 30,000 retail outlets, reported yesterday that total sales fell 3.3 percent for Saturday and Sunday, compared with the same two days a year ago.

Jim Neal, a principal at Kurt Salmon Associates, also reduced his holiday sales forecast yesterday to the low end of his initial range of 3 to 3.5 percent. And he questioned whether “unplanned specials” will work. “Are consumers going to jump back in the car and get items that are on sale that are not on their list?” he asked.

Luxury stores — which have enjoyed robust sales as well-heeled customers have benefited from the economy’s recovery — had the best performance over the weekend, despite offering only selected discounts.

In contrast, midpriced merchants such as Sears that cater to middle- and low-income shoppers — who have pulled back on spending as they have been more vulnerable to higher heating costs and a volatile job market — are trying to pull in customers with big discounts and expanded hours this week.

JCPenney will be opening at 7 a.m. from tomorrow through Friday, offering deals on jewelry and coats. Sears is offering discounts of 40 to 60 percent on jewelry and 25 to 30 percent off on watches through Friday, said Bill Masterson, a company spokesman.

Sears, Penney, Ann Taylor, Gap’s Old Navy and Limited Brands’ Express stores were among the chains that discounted more heavily over the weekend than on the same Saturday a year ago, said Margaret Mager, an analyst at Goldman Sachs.

Flickinger expects that stores this week will take additional discounts on heavy winter apparel such as outerwear and sweaters, which have been hurt by unseasonably warm weather in some regions.

Merchants also are trying to rope in customers with post-Christmas sales, mailing catalogs and issuing coupons for consumers at their stores. Over the past week, Ann Taylor has been handing out coupons, offering 20 percent on all merchandise, including sale items, from Dec. 26 through Jan. 3.

The Saturday before Christmas is traditionally the busiest day of the year for merchants, though last year the day after Thanksgiving stole that crown. However, the last weekend before Christmas could be losing its luster as there are more ways to shop for a holiday item.

The increased popularity of gift cards and online spending could be helping to skew the holiday-sales figures.

The National Retail Federation is forecasting that consumers will spend $17.24 billion on gifts cards this holiday season, accounting for nearly 8 percent of the season’s sales. Chicago-based General Growth Properties, which operates or manages 220 malls across the country, reported that gift-card sales should rise 20 to 25 percent this season from a year ago.

Online sales — which have been one of the bright spots of holiday shopping and are expected to hit the high end of forecasts — are not included in ShopperTrak’s sales figures nor merchants’ same-store monthly sales figures, which cover stores open at least a year.

Online sales, excluding business from travel and auctions, rose 49 percent from last Monday to Friday, compared with the corresponding days a year ago, according to comScore Networks.

With that sales surge near the end of the season, Dan Hess, senior vice president at comScore, expects online sales in November and December will be at the high end of its forecast of a 23 to 26 percent gain from the year-earlier period.

With a season that is two days longer than a year ago, the National Retail Federation is holding on to hope that procrastinators will save the season.

The trade organization estimates consumers on average had completed 81.9 percent of their holiday shopping as of Sunday, based on a consumer survey conducted by BIGResearch from Friday through Sunday.

According to the International Council of Shopping Centers, the seven-day period ended Dec. 27 accounted for 20.6 percent of holiday sales in 2003, up from 19.6 percent in 2002.

The seven-day period ended Jan. 3 accounted for 14.1 percent in 2003, up from 12.8 percent in 2002.