Christmas Won't Be So Merry for Retailers
Nov 7th 2012 9:52PM
Updated Nov 7th 2012 9:58PM
We all know retailers try to push the boundaries for the start of the Christmas holiday shopping season. Like clothing fashions that come out two seasons ahead of time, trees, lights, and trimmings start appearing on store shelves before Halloween's even arrived.
It's likely you can tell how poorly retailers think the season will be, if not for the industry then for themselves, by how early they try to juice sales with Christmas promotions. You just knew Sears Holdings (NAS: SHLD) was desperately grasping at straws a couple of years ago, when it created an online boutique called "Christmas Lane" and developed a store-within-a-store concept to sell holiday items in July.
A coming lump of coal
According to the National Retail Federation, retailers might have something to worry about again in 2012. They're forecasting that November and December sales, when retailers can make as much as 40% of their annual revenues, will rise only 4.1% from last year. That's the slowest rate of growth since 2009, when it barely ticked up at 0.3% and is more than a full percentage point below 2010's and 2011's growth rate.
That could explain a USA Today story highlighting the unofficially official Black Friday flyers appearing on various deal websites. It notes that Macy's (NYS: M) offered a "sneak peak" at its shopping extravaganza deals on Monday and deal sites started posting variations of them soon after. Radio Shack (NYS: RSH) , Sports Authority, and Sears' Kmart chain have all seen their ads published without any pushback from the retailers for the "transgression."
While some retailers do drop cease-and-desist letters on the deal sites -- Wal-Mart (NYS: WMT) and Costco (NAS: COST) are two that aggressively enforce the practice -- they're often still able to come out earlier than the actual promotional period would dictate, as retailers understand they can generate buzz for their sales by whetting consumers' appetites.
A brewing nor'easter
Yet holiday sales could be more constrained than even the retail federation's data suggests, because many stores have been reporting fairly strong October sales. The International Council of Shopping Centers said sales jumped 5% from the year-ago period, ahead of the 3.5% forecast the trade group made. But combine a slow economy with the impact Hurricane Sandy will have in the Northeast, and analysts are worried consumers will be cutting back even more of what they spend on Christmas gifts. Apparently, pushing the envelope serves only to pull sales forward, not expand them.
Of course, some retailers, such as Home Depot (NYS: HD) and Lowe's (NYS: LOW) , might see stronger sales regardless as people repair the damage the storm wreaked, but the lingering impact could cast a pall over much of the rest of the retail industry. Fortunately, while coastal towns and cities in New Jersey and New York bore the brunt of the hurricane, it was nowhere near the broad swath of destruction when weathermen forecasted a possible 17-state path of ruin.
Silver bells are tarnished
Sometimes it seems retailers try to make it seem every day is Christmas. And though we grumble about the blurring of the holidays, we also prove we're still willing to take stores up on their deals when they're offered. And online it's starting even earlier, with the retail federation saying almost 62% of retailers started offering online holiday specials by Halloween, up from 53% in 2011.
The retailers, though, just might end up cutting off their own knees by trying to jingle the cash registers all year long. By pushing the Christmas season earlier into the calendar, the only black they'll see on Friday will be the lumps of coal deposited on their bottom lines.
The article Christmas Won't Be So Merry for Retailers originally appeared on Fool.com.Rich Duprey owns shares of Lowe's. The Motley Fool owns shares of Costco Wholesale and RadioShack and is short RadioShack. Motley Fool newsletter services recommend Costco Wholesale, Home Depot, and Lowe's. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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