Holiday Blues?

With all of the pre-holiday buzz and widely optimistic sales projections, anything other than a blockbuster 2012 holiday shopping season was bound to be a letdown. Few expected the numbers that came out just before Christmas: Both MasterCard and the International Council of Shopping Centers (ICSC) reported that sales for the holiday season at that point were up just 0.7%. This was far below the robust predictions that many analysts and observers made before the shopping season was underway (most often between 3%-6%).

A recently released survey of major retail chains shows that the cumulative impact of the Fiscal Cliff political drama, the Newtown shooting disaster, a warmer-than-expected early winter, and the lingering effects of Hurricane Sandy may have contributed to a slower-than-anticipated start to the holiday shopping season. In my holiday sales prediction column in this space, I talked about some of the reasons why the more optimistic numbers might not pan out, but I definitely didn’t foresee anything like 0.7%:

“…the widespread sunny predictions we have seen from some analysts and observers of holiday spending increases of up to 5% may be a little too robust. I suspect that a safer bet would be to dial back the optimism into the 2-4% range.”

Were we all off base? As it turns out, the pundits may end up closer to reality than it appeared at first glance. New data is emerging that suggests that we may have begun writing the obituary for the 2012 holiday shopping season a bit too early. The industry gold standard, the National Retail Federation, continues to stand by its 4.1% holiday sales prediction, and anecdotal reports of a busier-than-normal final week of December support that sunnier outlook.

A number of national brands made up serious ground at the end of the month, even with early struggles. Thomson Reuters reports that same-store sales among a group of major retailers (excluding drug stores) was up 4.5% in the month of December. Apparel retailers did particularly well, according to the report, with Nordstrom up 8.6%, Gap was up 5%, Macy’s up 4.1%, and Kohl's reporting a 3.4% jump. Some of the year-end boost is attributable to a blast of colder weather, which may have given apparel brands a welcome bump.

So what’s the verdict? Do we believe the pessimism, or do we accept that this may have simply been a back-loaded shopping season, with a sales spike at the end of the month helping to bring sales figures back in line with the original projections? To be honest, I think it might be a little bit of both. Whatever the final numbers, it’s safe to say that the 2012 holiday shopping season looked like a donut: solid at the beginning and end, but with a big hole in the middle.

A trend toward more bargain hunting at the beginning and end of the season would certainly explain those results. The only fly in that ointment is that some of the discount and value brands that you might expect to do well when consumers are being selective and counting their pennies apparently didn’t perform particularly well: While Wal-Mart was not included in the Thomson Reuters survey, the chain has reported sluggish sales throughout December, and Target sales remained essentially flat.

If shoppers are looking for bargains, however, then profits and bottom lines could be impacted — and we’ll need to pay close attention to see how retailers respond in terms of new-store strategies going forward. Sales figures are all well and good, but the true judge the 2012 holiday shopping season will be, as always, profits. It’s also worth noting that, despite the slow-but-steady economic recovery, consumer confidence went down in both November and December. While some of the external drama and distractions are in the rearview mirror, deep political tensions and broad financial uncertainties continue to linger. While we may look back on the 2012 holiday season as largely positive for brick-and-mortar, long-term uncertainty is not a good way to get people to start spending their money — whatever the season.

How do these industry-wide numbers compare with how you saw the holiday shopping season wrap up? Was the positive late December surge a one-time event or the prelude to a stronger 2013? We’d love to hear your thoughts through a comment below or you can contact me directly at jeff@jeffgreenpartners.com.


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