Despite Strong December Sales, a Mixed Holiday Season for Retail

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Holiday Shopping
The retail industry is reporting some much-needed good news in the form of stronger-than-expected December sales figures. But those numbers seem to have come as a result of desperate last-minute discounting, suggesting reduced profit margins and an increasingly hard-to-please American shopper.

The 20 retailers surveyed reported year-over-year sales growth for the month of December, with an average increase of 4.5% over December 2011 according to the International Council of Shopping Centers. The strong month comes after a weak November, with a net result of 3.1% total sales growth for the November-December shopping season.

That's particularly good news in light of some weak early returns from the season. On Christmas, MasterCard Advisors Spending Pulse reported 0.7% sales growth for the season, far below the 3% to 4% forecast by many analysts. ShopperTrak, which measures retail store foot traffic, likewise downgraded its projections for the season in mid-December. Much of the speculation about the reason for the weak sales figures focused on several events that sapped consumers' drive to to shop, including Hurricane Sandy, the fiscal cliff crisis and the school shootings in Connecticut.

In all likelihood, the retailers' rebound can be traced to a late push with deep discounts that drew last-minute shoppers to the stores. When we spoke to IHS Global Insight's Chris Christopher last week, he warned that the last two days of the season could push sales above expectations.

"Sunday and Monday were pretty good, and we won't know until we get retail sales data in January," he said. "[We're seeing] excessive sales as they're trying to make up profits in high volume ... they're trying everything to get people in the doors."

Accenture retail analyst Chris Donnelly echoed that opinion in comments to the AP, noting that retailers had to offer deep discounts on more product than they'd wanted to.

If true, that suggests that the late surge in holiday sales came at the expense of profit margins. Take Macy's, for instance: While announcing a December same-store sales increase of 4.1%, it also lowered its fourth-quarter earnings outlook and announced its intention to close six stores. Holiday sales might have recovered at the buzzer, but that doesn't mean a solid victory for the industry.

And the fact that shoppers turned out in force on Black Friday and Cyber Monday, then seemingly laid low until the last-minute sales, suggests that retailers have created a monster: A consumer who will only shop when there are big discounts to be found.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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9 Comments

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maa2626

consumers are not "hard to please" consumers are now being thrifty. an economy based on consumer spending is no way to run a country.

January 07 2013 at 6:57 AM Report abuse rate up rate down Reply
taliesenr

All the talk about the fiscal cliff did not help anything. I have gone to many large retailers and they still quite a bit of Xmas decorations and that left over and this was after the new year.

January 04 2013 at 11:54 AM Report abuse rate up rate down Reply
Frank

Are gift cards included in the numbers?

January 04 2013 at 9:11 AM Report abuse rate up rate down Reply
Taina

Selling something for what you paid for it doesn't create profit, except in a liberal's mind.

January 03 2013 at 11:44 PM Report abuse -2 rate up rate down Reply
1 reply to Taina's comment
Frankie

Conservatives are too stupid to even know what profit is.

January 04 2013 at 2:01 AM Report abuse +1 rate up rate down Reply
rexitalia

Mr Brownell, I would wonder where and how your figures of a glowing holiday sales period were arrived at. I am indeed in retail /wholesale for a consumer product which is most desirable to anyone in the public. That said I will tell you point blank, you need to check your basic math skills since this season was A BUST!!!!!!! I truly apprieciate the efforts of HP to force feed the public this false sence of uphoria but this is really false information. At best the season was marginal ,gains if any were in highly diiscounted goods which were marked up to be marked down.

Things are no better in 2012 than they were in 2011. Please stop this campaigne of disinformation, the public can read the stock prices of major and minor retailers and actually talk to small business owebers who will tell you things still have a big balck cloud over them. No amount of smoke and mirrors can chnage that.

January 03 2013 at 11:26 PM Report abuse +1 rate up rate down Reply
jelun

Since most everything I see in the stores is priced at least triple it's true worth I am not sure how 60% off can be a discount that is too deep.

January 03 2013 at 9:22 PM Report abuse +1 rate up rate down Reply
LNOFT97

There was no Big Thing to be bought this year, from what I can tell. How many flat screen TVs does a house need? How many 60 inch TVs? Fashions? For the young, who want everything, maybe. The last minute surge is that old, old story: "Christmas is in 5 days??? OMG, we have to get them SOMETHING! To tha mall, stat!"

January 03 2013 at 7:33 PM Report abuse rate up rate down Reply
gammy

We felt it was much more important to save, save, save the last few years. Therefore our xmas budgets are very small. But it feels so good to know we have lots of savings for whatever comes our way. I hope people did not go into debt this year.

January 03 2013 at 4:49 PM Report abuse +3 rate up rate down Reply