Despite Strong December Sales, a Mixed Holiday Season for Retail
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.
Sponsored Links"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.