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Retailers Brace For Disappointing Shopping Season

Retailers typically look forward to the holiday season as a time for major profits. Many retailers experience 35-40% of their annual sales during the period from Thanksgiving to Christmas. But this year, retailers could be singing the blues by the time the Christmas holiday shopping season concludes, according to several recent surveys.

holidaygiftThe National Retail Federation (NFR) forecasts that while total holiday sales are expected to be higher this year, the average holiday shopper will spend $738 on gifts, home decor, and greeting cards this year – 2% less than last year’s $752. Over half of those polled by NFR (51%) said economic concerns would affect their holiday spending plans, and 79.5% said they plan to spend less overall during the holidays.

American Express recently surveyed over 500 companies with fewer than 100 employees and found that only 22% of the companies surveyed expected strong holiday sales this year – a 14-percentage point drop from last year. Among the retail companies surveyed, only 30% said that they expect strong sales this season, compared to 41% in 2012. The outlook is clearly bleaker this year than last.

So what’s the problem this year? There are several actually. First, Thanksgiving is late on the calendar this year – not until November 28 – so this compresses the number of days (six fewer than average) to shop. Second, mall traffic so far in November has been below expectations according to the NRF.

cciThird, and most important, consumer confidence has plummeted in recent months, as I have reported often. On October 17th, Bloomberg’s monthly consumer expectations gauge indicated the percent of respondents saying the economy is going to get worse showed the biggest surge since October 2008.

The University of Michigan’s Consumer Sentiment Index, another indicator of consumer confidence, fell to a nine-month low in October.

Not surprisingly, US retailers are discounting earlier than ever as they brace for the weakest holiday shopping season since 2008. Faced with wary shoppers and a shorter holiday season, retailers are piling on deals as they jockey for market share during the most important sales period of the year.

For example, Walmart is dangling a 32-inch flat-screen TV for $98, down from $148 last year. Sears has waived layaway fees and its Kmart chain is introducing a rent-to-own program. More than a dozen retailers are opening earlier, or for the first time, on Thanksgiving Day. Among the attention-grabbing stunts: a $1 million jackpot for one of the first shoppers to visit Gap Inc.’s Old Navy chain on Black Friday.

For the fourth year in a row, Americans’ disposable incomes in 2013 have only inched up. The disparity between wealthy and lower-income shoppers is already showing up in chains stores’ 4Q profit estimates, with Tiffany & Co. projected to fare better than Walmart.

In addition to heavy discounting, some retail chains plan to be open on Thanksgiving Day. Stores that plan to open on the holiday include Kmart, Walmart, Target, Best Buy, Macy’s, Sears, Toys’ R Us, The Gap, Banana Republic, Old Navy and others. They say they’re merely responding to consumers who would be shopping online if they didn’t have the option to hit the stores.

That’s part of it, no doubt, but an examination of retailers’ financial numbers reveals another reason. Many of them are underperforming and are desperate for every dollar of sales. Some like Kmart, Walmart, Sears and The Gap will be open all day long, opening earlier and closing later. I think that’s very sad!

With more stores than ever before choosing to open for at least part of Thanksgiving Day, there has been a lot of negative public response to those merchants who will be doing business on one of the most American of holidays. While many people like the idea of shopping on Thanksgiving, merchants who are opening are getting some backlash, as they probably deserve.

I could say more, but I’ll leave it there and wish you a very HAPPY THANKSGIVING!!

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