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America's Research Group/UBS 2008 Christmas Survey

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Consumers interviewed in the first America's Research Group/UBS Christmas Survey painted a gloomy picture for the nation's retailers this season, saying that they will spend less (40.1%) and buy fewer gifts (35.3%) this year. These are the highest figures in 13 years for "spending less" and 8 years for "buying fewer gifts." UBS has teamed with America's Research Group (ARG) for six surveys this Christmas season. Calling this Christmas shopping season a "perfect storm" for retailers, C. Britt Beemer, CEO and founder of America's Research Group (ARG) predicted that retail sales will be down 1% compared to last year, his first negative prediction in 23 years of conducting Christmas surveys. "This year looks so bad," he said, "that even normally good signs for retail sales, such as more Americans staying home this Christmas, can't save the season for retailers." Beemer has correctly predicted Christmas retail sales in 16 of the last 17 years. Consumers are worried and 44.7% say they feel worse this Christmas than a year ago. The factors are many. Of those 40.1% of consumers spending less, 27.9% are concerned about the economy, 22.4% are trying to cut down on spending, 15.7% have higher credit card debt, 13.7% are impacted by gas and grocery prices and 10.7% cite job insecurity. As consumers are cutting back in many ways and for many reasons, there appear to be no bright spots in the general picture for retailers: - 44.6% will spend less this year due to higher grocery prices, - 52.6% have higher credit card balances than last year and 73.2% of those will spend less on Christmas gifts as a result, - Of consumers who say they will spend less this Christmas, the economy and job insecurity impact 38.6% compared to 27.0% last year, - 46.3% of consumers say they will buy fewer gift cards because they fear that stores could go into bankruptcy and not honor the cards, - Only 22.3% expect to buy on-line versus 30.2% who bought there last year. The travel industry will suffer also as more people stay home. Over half of consumers (50.3%) say they will travel less (a 13-year high) compared to 19.0% who will travel more. Parents will try to create a jolly Christmas for their children in spite of their economic worries. Many (44.4%) will buy less for their spouse so they can spend their normal levels on the children. The children are aware, however. Over a quarter (25.7%) of parents believe that their children feel their financial pressure and are accepting their lower spending levels. Of those consumers buying children's toys, 44.5% plan to spend less versus only 27.4% who plan to spend more. Almost half of parents (47.9%) say their child has no "must-have" toy. Bicycles, however, continue to be popular gifts with 12.7% of consumers looking to buy a bicycle, up from 9.9% last year. Wal-Mart will be a big winner again this year with 92.9% expecting to shop there this Christmas, up from 85.3% last year. Percentages of consumers planning to shop are up also for discount stores (65.8%) and membership warehouse clubs (33.7%), both figures 13-year highs. Some retail locations and stores will lose customers. Mall traffic will see a definite drop with 33.9% going less to enclosed malls. Only 9.5% of consumers said they would shop at major department stores, a 13-year low. On the other hand, free standing stores are more popular this year with 84.8% of consumer shopping there more, up from 62.9% last year. Wherever they shop, consumers don't expect good service. Almost seventy percent (68.5%) expect stores to be short handed and 21.0% of these consumers will leave those stores due to lower staffing levels. There will be more last minute shoppers this season with 38.1% buying after December 15th. compared to 30.5% last year. Shoppers will wait to the last minute because an overwhelming majority (87.2%) expect retailers to lower their prices just before Christmas. Today, 85.5% consumers say they will be enticed by 50%-off sales, a 13-year high. Over seventy percent (70.7%) of consumers will be watching for more store advertising this Christmas. Newspaper inserts will see their best readership levels in 13 years with 50.8% of consumers reading them more and 40.1% watching TV for sales. Finally a low 35.1% of consumers will buy something nice for themselves and 27.6% of those will spend just $36 to $50. The America's Research Group/UBS 2008 Christmas Survey consisted of 1,000 telephone interviews conducted Thursday, Friday and Saturday, November 6 to 8, 2008, at America's Research Group headquarters in Charleston, SC. The error factor is plus or minus 3.8%. America's Research Group is one of the nation's foremost consumer research and strategic marketing firms. CEO Britt Beemer is a key resource and advisor to leading brands and top retailers. He is author of The Customer Rules, a new book published by McGraw-Hill. UBS Global Equity Research provides the broad global perspective and in-depth analysis that institutional investors need to make good investment decisions. With more than 600 analysts, associates, strategists and economists in EMEA, APAC and the Americas, UBS covers approximately 85% of the world market capitalization - over 3,300 companies worldwide across 46 different markets. In addition to UBS's disciplined fundamental research, clients also rely on UBS for corporate and expert access to give them the insight they need, when they need it.

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