Ugly Holiday Forecasts So Far

Discussion
Dec 27, 2012

While some were holding out hope that last-minute selling and after-season gift card sales would help save the day, early estimated holiday results appear to be coming in lower than expected.

The bleakest came from MasterCard Advisors SpendingPulse which measured that sales in the two months before Christmas increased 0.7 percent compared to a two percent gain last year. With some reports casting that rate as the slowest since 2008, many retail stocks tumbled on Wednesday.

SpendingPulse tracks total U.S. sales at stores and online via all payment forms.

Michael McNamara, vice president for research and analysis at MasterCard Advisors SpendingPulse, told Bloomberg News that Americans became concerned about the fiscal cliff towards the end of the selling period. Hurricane Sandy also interrupted shopping in stores and online after it slammed into the East Coast in late October.

"You are looking at modest to marginal growth from a year ago," said Mr. McNamara. "Weather events and the fiscal debate both anchored the season in terms of growth. The media coverage, which did a good job of explaining the negative consequences of the fiscal cliff, created this negative trend in consumer confidence and spending."

The dismal report came after Friday’s report the Consumer Confidence Index plunged in December to its lowest point since July, with economic worries blamed.

Marshal Cohen, chief research analyst at NPD, estimated that customer traffic over the final weekend was in line with the same time a year ago, but shoppers seemed to be spending less.

"There was this absence of joy for the holiday," he told the Associated Press. "There was no Christmas spirit. There have been just too many distractions."

The International Council of Shopping Centers (ICSC)/Goldman Sachs Retail Chain Store Sales Index reported that sales edged up only 0.7 percent in the week ended Dec. 21 on a seasonally adjusted basis versus the prior week, and up 3.2 percent versus the year-ago period. ICSC still expects December industry sales will increase 4 percent to 4.5 percent (excluding drug stores) year-over-year, with the final week expected to be boosted by the calendar shift.

Even online sales apparently were affected, with SpendingPulse showing growth of only 8.4 percent from Oct. 28 through Dec. 22. That’s a dramatic slowdown from the online sales growth of 15 to 17 percent seen in the prior 18-month period.

But ComScore contradicted those figures in reporting that e-commerce sales increased 16 percent between Nov. 1 and Dec. 21 over the same period in 2011, helped by a 53 percent surge in the last week. ComScore said the late-season surge was helped by ‘Free Shipping Day’ (Dec. 17) landing on a Monday combined with the fact that so many retailers extended their promotions into the middle of the week with guaranteed shipping by Christmas.

What’s your assessment of this holiday selling season? What’s your take on the consumer’s mindset?

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23 Comments on "Ugly Holiday Forecasts So Far"


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Bob Phibbs
Guest
9 years 5 months ago

Everyone is looking for trends, answers and reasons. Until retailers post results next week with actual numbers, it seems even ComScore isn’t an accurate read.

Dick Seesel
Guest
9 years 5 months ago
The NRF (not cited in the article) continues to stick to its overly optimistic forecast of over 4% gains, but the rest of the numbers suggest otherwise. I predicted increases in the 2-3% ranges based on BTS sales and the consistent but modest gains all year. If the numbers turn out to be flat, it’s a big disappointment—especially with two extra selling days this year between Thanksgiving and Christmas. When stores start reporting comp sales next week, they will cite a variety of reasons: The lingering effects of Hurricane Sandy (which may have helped DIY stores but nobody else in the region), the “fiscal cliff” issue (which looked like “noise” until the last critical weekend before Christmas), and the terrible events at Newtown. But the numbers are still disappointing given the overall upbeat economic forecast and the amount of newness in stores this season. The next big challenge to retailers will be how quickly they can liquidate seasonal goods. Some serious cold weather since mid-December will help, but stores that I visited even a week… Read more »
Tony Orlando
Guest
9 years 5 months ago

Money is lacking in most folks’ pockets, and the fiscal cliff has changed the picture. We have been down about 6-8% since Labor Day, and I’m glad to get what we can out of this area. Deep discounting has been the norm here for years, but this year it got ugly, and many stores had sales but few profits.

Without economic growth, we must fight for a smaller piece of the pie, and until that changes, consumers will wait for the deal before they buy….

David Biernbaum
Guest
9 years 5 months ago

I am very skeptical about how the “votes” are counted. Do holiday sales and purchases counted include all online purchases? Are we counting all the gift cards and subsequent transactions? Are we counting all non-Mall purchases?

Trends regarding how people buy gifts for the holidays have changed in a very big way over these past few years. Are we still measuring sales by old standards? Maybe MasterCard’s business in itself has lost share to a different type of credit card? Let’s pause before we jump to faulty conclusions. Besides, did people really shop less because they were worried about the fiscal cliff? Really? Seriously?

Paula Rosenblum
Guest
9 years 5 months ago

I got my first press call about this at 7:45 am yesterday.

First of all, the holiday season has certainly lengthened. Gift cards make it a viable selling season through at least the middle of January.

Second (and in my mind, very key) the Thanksgiving door busters create an artificial early spike in traffic. Anything after “CyberMonday” is sort of a blah period until consumers see retailers wave the white flag and take the deep discounts.

I understand that Hurricane Sandy was top of mind, and that all the talk about the “Fiscal Cliff,” which really means very little to the general public besides “uh-oh…bad” dampened consumer confidence. But we’ve seen retail spending move in the opposite direction to consumer confidence before—as in 2012.

I really do think the Thanksgiving openings and hyper-promotion (I called it ‘madness’ somewhere else, but I think I offended some people) changed the entire tone of the season. I believe this was mostly a self-inflicted wound.

Phil Rubin
Guest
Phil Rubin
9 years 5 months ago

Regardless of how sales results come in for this holiday season, my expectations is that the earnings impact will be markedly worse. There is no way that the indiscriminate level of discounting this year is a viable way to generate incremental profits.

Further, the initial analyst reports are concluding that extending the holiday selling period by starting the sales on Thanksgiving Day only served to further depress the results.

Retailers are going to have to invest in other avenues of growth, namely customer relationships, via using data to be smarter about who to offer what in terms of merchandise, promotion and other reasons to buy beyond mass discounting.

Doug Stephens
Guest
Doug Stephens
9 years 5 months ago

I know it’s a bitter pill to swallow, but we have to accept the fact that the 30-40 year period prior to 2008 was a highly unusual and largely unrepeatable phase in modern consumerism. It was a period in which we routinely came to expect 5+% YOY increases in spending by consumers. We were disappointed when stocks returned anything less than double-digit gains.

It’s over folks. We have too much retail and most of it isn’t good enough to truly win a share of the consumer’s income (which by the way is shrinking on average). The giddy days of rampant, credit-crazed spending have come to an end.

This is a new era and it’s going to be a painful and potentially perilous transition for any retailer that doesn’t understand it. If you’re a retailer and you’re not remarkable…you’re invisible. There is no well pent-up, excess demand. This is reality.

Camille P. Schuster, Ph.D.
Guest
9 years 5 months ago

With every news report talking about the fiscal cliff and how much more money would be taken out of paychecks after the first of the year, why would anyone expect holiday sales to be strong? There is a relationship between news hyping the seriousness of the implications of the fiscal cliff, such as less take-home pay, a possible recession, lower expectations for job growth, and how willing people are to spend money freely.

Kenneth Leung
Guest
9 years 5 months ago

I think a combination of factors are involved. The fiscal cliff and Sandy news cycle didn’t help. The broader trend this year is that there really aren’t any ‘must have’ items in the toys or electronics categories I can see that drove people to the stores and online in droves to browse. To an extent, the hype of Thanksgiving sales took some of the wind from Christmas. If there are no must-have items, today’s consumers are defaulting to gift cards which spread out the spending.

I’m looking forward to seeing what the mood is at the NRF Big Show in January. By then we will get a better read of the true status.

Gordon Arnold
Guest
9 years 5 months ago

With the better part of two generations either unemployed or under employed, is there any wonder? Simply put, it’s the economy or, dare we admit, the depression that won’t go away.

Connie Kski
Guest
Connie Kski
9 years 5 months ago

I own an independent pet store close to Newtown CT. Our sales were up slightly (year to year) until 12/20 and then they went through the roof. We had the biggest day ever in the history of my store on 12/22—and then beat 12/24/11 on Christmas Eve.

The mood in our area is somber. Newtown is too close to home. That said, Christmas still happened for families and it happened at the last minute. We showed average tickets that were substantially higher than normal, and higher than last year. It was almost as if the customer said they were going to try to lift everyone’s spirits by spending more money than they might otherwise.

Ed Rosenbaum
Guest
9 years 5 months ago

Fiscal cliff and unusual and severe weather conditions all add to the poor results. I wonder what the picture shows if the areas severely affected by Sandy are taken out of the equation? One can’t help but agree with keeping one’s money in one’s pockets.

Gene Detroyer
Guest
9 years 5 months ago

We can talk about fiscal cliffs, hurricanes and shootings. But, the reality is as Doug described it. We have lived in a false consumerism for the past 30 years driven by easy credit.

The real challenge retailers are facing is not what happens in the future, but what the people have experienced this holiday season. Imagine if the consumer found that their holidays were just as enjoyable with fewer purchases. (Does anyone want to bet against that?)

Let me also add a personal experience for this holiday season that resulted in more spending and less material gifts. For my daughter and grand-daughter tickets to Annie on Broadway. For two of my grandsons, tickets to a show, Dinosaur Zoo followed by a fun lunch. Both experiences will last longer in their appreciation than any toy we could have given them.

Doug Fleener
Guest
9 years 5 months ago

While most of our clients saw an increase over YA, they had to work extremely hard to do so. The good thing is the majority of them did it without discounting.

I think this week after Christmas will tell us even more about the consumer’s mindset. It’s one thing to spend money on gifts, but it’s another to spend it on yourself after the holidays.

ron kurtz
Guest
9 years 5 months ago

It will be interesting to see the final retail numbers for the Nov/Dec period. As a former CMO that sometimes had to stretch to explain a shortfall in sales, I can see that retailers have a number of obvious reasons for explaining this year’s apparent disappointment.

However, as early as our September survey of the affluent, it was clear this would be a challenging holiday season for retailers. The “fiscal cliff” was a likely weight on the mood of the affluent and then Sandy and Newtown added potential new issues.

Ryan Mathews
Guest
9 years 5 months ago

Let’s see…Sandy, fiscal cliffs, massive unemployment, weird weather, and Newtown—not exactly the perfect formula for great retailing.

Craig Sundstrom
Guest
9 years 5 months ago

Thank you Connie for helping to remove Newtown from the list of potential scapegoats—it was a runner-up in last week’s hand-wringing—but it seems Sandy and Cliff have become the choix-du-jour for the “world-is-coming-to-an-end” crowd.

Basically, it seems, we are faced with the prospect of actually doing what (tax increases and spending cuts) everyone claims we need to do, and no one is happy. I join Doug and Gene in wondering how these people will cope when a 0.7% increase—and, yes, it still IS an increase—looks good by comparison.

David Slavick
Guest
David Slavick
9 years 5 months ago

More days to shop and lift in online sales yields an overall 2.5% increase vs. PY. Nothing to celebrate given the depressed environment for the past 4 years. However, more online shoppers yield more identified customers to target communications on a personalized and relevant basis in 1st quarter 2013.

You typically see a slight lift in January sales because of gift card and incentive bounce back offers (spend $100, get a $10 “card” or gift card only good after 1/1/13) plus returns generate add-on sales through clearance buys.

I’m not seeing the traffic nor any real excitement on the consumer side to this Holiday, but it’s not “depressed” or lacking in joy for the season. We are giving the media too much credit as well as Congress in “icing” consumer demand. I find it hard to believe that the broad majority of consumers are holding back on spending plans in anticipation of a tax hike should the “Bush era” tax cuts not be renewed.

Ralph Jacobson
Guest
9 years 5 months ago

Weak sales, however I’d like to compare item movement. The challenge is deep discounts. Merchants have to move more items just to stay even with revenue numbers of last year. It’s a consumer’s market, and you have to look at movement, in addition to sales.

Mike Osorio
Guest
Mike Osorio
9 years 5 months ago

Overall, the global economy is going to be fine. We will get beyond the silliness of the ‘fiscal cliff’ and consumers will once again spend. In fact, I think the final numbers, when we look at the final results through January will be reasonably good and on forecast.

The unfortunate impact of the gloomy media coverage and some very real issues/distractions led consumers to spend less than they might have, but the impact on stock prices for the best retailers create a buying opportunity.

David Livingston
Guest
9 years 5 months ago

My assessment is the economy is always good all the time for good retailers. Period.

Christopher P. Ramey
Guest
9 years 4 months ago

50% of the total spend is done by the top 10%, a substantial percent who are about to get whacked. Even though research says they’re open to new taxes, it doesn’t mean it’s a zero sum game.

Something has to give and it’ll probably be retail.

Connie Kski
Guest
Connie Kski
9 years 4 months ago

My independent pet shop was up more than 6% over last year for December. We posted the biggest day in my 12 Decembers on 12/22.

We were tracking ahead of 2011 all month, but increased the spread in the last few days. I can attribute this to “I need to feel better” shopping after Sandy Hook.

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