Retailers, battling a slower than expected December slump, have a few bright spots on the horizon. Discounts have brought more shoppers into stores in the past week, as stores have discounted much of their merchandize by up to 80%, according to store executives. Still, gains aren’t going to be enough to boost conservative holiday forecasts, which are stuck at a 2 to 4 percent increase in comp store sales.
Gift card redemptions, online shopping, and early spring goods in stores are also pushing traffic and sales up. Stores in many parts of the country are benefitting from a dip in the temperature that is finally forcing consumers to buy winter wear.
Heavy discounts will inevitably hit margins, particularly on highly profitable designer goods, sportswear, blouses, and coats.
The slump in holiday selling is being blamed on the fiscal cliff and threat of higher taxes, more general economic uncertainty, fallout from Hurricane Sandy, and a collective blow to our national mood after the shootings in Newtown, Connecticut. Many consumers are still keeping their belts tight, as they continue to pay down debt and control discretionary spending.
It all comes at the end of a year of strong discipline for retailers, with costs and inventory both at levels that could’ve enabled hefty profits. As it is, that discipline was a bulwark against the unexpected fall in traffic after Christmas.
“The traffic was definitely down, even after Christmas,” Claudio Del Vecchio, chairman and chief executive officer of Brooks Brothers, told Women’s Wear Daily. “Where we had very generous deals we did well. Where we did not, we did not do well,” Del Vecchio said. The drop off reminded him of the beginning of the 2008 recession.
Firms are looking forward, toward a spring season that will be boosted by the resolution of fiscal cliff tax issues, more stable weather, and a continued uptick in consumer confidence.
Black Friday and Cyber Monday were recording breaking, and the weekend before Christmas was also strong, which helped boost overall numbers. Still, some retailers are concerned about losing the chance to sell lucrative accessories at full price if sales don’t pick up soon. Discounting on fall merchandise typically begins in January.
Comp store revenues, released Friday, were not spectacular. Thomson Reuters estimated a 1.7% increase among stores that still report monthly comp numbers. The figure is lower than last week’s 2% figure, based on new, more negative reports from analysts.
Christmas to New Years was up 4% overall, according to Craig Johnson of Custom Growth Partners, as quoted in WWD. By his estimates, November 1 to December 24 was up 2.5%.
Target is estimated to post a 0.8 percent increase for the month; Nordstrom Inc., 3.4 percent increase; Macy’s Inc., 4 percent increase and Kohl’s Corp., 1.2 percent increase. Zumiez Inc., is expected to post a 3.6 percent decrease. â€¨â€¨Gap Inc.’s estimates improved from 3.2 to a 3.5 percent increase. That’s compared to Dec. 2011, when comparable store sales fell 4 percent. â€¨â€¨The TJX Cos. Inc. is estimated to increase 2.3 percent, and Ross Stores Inc. should be up 2.7 percent. Limited Brands Inc. is expected to increase 4.5 percent. Those firms were strong for 2012, but their results were much weaker than the December 2011 numbers of 8, 9 and 7 percent. The Wet Seal Inc. and The Buckle Inc. are expected to post declines of 5 and 0.3 percent.
Mall traffic was also down, and Deborah Weinswig at Citi stated in a report that, “We are now concerned about [fourth-quarter 2012] gross margins. However, retailers should benefit from the favorable holiday calendar and strong e-commerce growth.” E-commerce increases ranged from 16 to 25%, and 2012 had 2 more holiday shopping days than 2011.
Promotions and discounts got wild, as companies dropped prices on designer goods by up to 80% and held flash-sales. Web sales also spiked. Prices dropped fast on goods that weren’t showing strong sell-through. Foot traffic stayed down, despite discounting, but sell-through did improve.