Summer hasn't officially begun, and yet the mad dash for Christmas cash is under way.
In a nod to the fragile state of the modern consumer, Toys R Us is trotting out an old-fashioned idea: its first Christmas Savers Club -- in June.
The program marks an unusually early kickoff to the holiday season and signals the unease that is moving through the retail industry as high unemployment and financial worries continue to weigh on consumer spending.
"We know that parents and extended family are still challenged from a budget standpoint and consumers are still very value-conscious," said Greg Ahearn, senior vice president of marketing and e-commerce at Toys R Us Inc.
While Ahearn declined to discuss his predictions for the Christmas season, the short-lived U.S. retail sales revival this spring suggests retailers are heading into a lukewarm holiday shopping season.
Encouraging shoppers to put money away early in a Toys R Us account allows the company to lock in sales before holiday toy price wars begin. For the past four holiday seasons, Wal-Mart Stores Inc., the nation's largest toy seller, launched price cuts on popular toys before Halloween. And Target Corp. and Amazon.com Inc. followed suit.
Toy merchants in particular count on the last three months of the year for a large chunk of their annual sales. During the last three years, Toys R Us generated more than 39 percent of its sales and a "substantial portion" of operating earnings in the fourth quarter.
"It is part of a strategy to insulate Toys R Us from price wars and make it more difficult for people to just compare price," said Lutz Muller, head of Klosters Trading Corp., a toy industry consultant.
Toys R Us has been doing its best to regain ground from Wal-Mart since 2005 when a group of high-profile investors bought the distressed toy store chain and hired former Target Vice Chairman Gerald Storch to run it. Since then, Toys R Us has expanded its private label program and worked with vendors on exclusive toys to make it difficult for shoppers to compare products solely on price.
Now the company is pushing the limits of Christmas creep. The practice of promoting holiday sales before the official start of the season on Thanksgiving weekend has been around for years, but went into overdrive when the U.S. went into a recession in late 2007. Retailers from Walgreens to Neiman Marcus began urging shoppers to think about Christmas gifts earlier each year.
In 2006, Wal-Mart unveiled holiday toy deals in October. In 2007, L.L. Bean mailed its holiday catalog in September. Last year, Sears launched its Christmas Lane shop in July.
Now that Toys R Us is set to go public, having a strong holiday season is critical to boosting its market value -- even if that means prompting consumers to think about Christmas when they are busy cleaning off the grill and packing up their beach totes.
The Christmas Savers Club allows shoppers to earn a 3 percent bonus on the money they set aside. Shoppers contribute money by going into a store and purchasing what amounts to a gift card. The card comes with a passport-style book with an envelope to keep receipts and a ledger for keeping track of deposits and withdrawals.
Shoppers can put up to $2,500 on the card, yielding a bonus of up to $75. The bonus is calculated on Oct. 16, and spending with the card begins Oct. 31. The amount on the card doesn't expire, meaning, like a gift card, it is good after Christmas.
The Toys R Us savings account promotion comes as consumers have boosted their personal savings rate. The savings rate, as a percentage of disposable personal income, climbed to 3.6 percent in April, the highest level since January, according to the U.S. Department of Commerce. The savings rate hovered between 1 percent and 2 percent from 2005 to 2007, when housing prices were soaring and consumers were tapping their home equity to spend.
"Consumers can't spend like they did because, one, they don't have access to credit and, two, they don't want to spend like they used to," said Scott Hoyt, senior director of consumer economics at Moody's Economy.com. "It's still going to be a difficult (holiday) season, clearly better than the last few, but by no means will it be back to business as usual."