Shoppers disappoint retailers this holiday season

Published on NewsOK Modified: December 26, 2012 at 7:12 am •  Published: December 26, 2012
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WASHINGTON (AP) — U.S. shoppers spent cautiously this holiday season, a disappointment for retailers who slashed prices to lure people into stores and now must hope for a post-Christmas burst of spending.

Sales of electronics, clothing, jewelry and home goods in the two months before Christmas increased 0.7 percent compared with last year, according to the MasterCard Advisors SpendingPulse report.

That was below the healthy 3 to 4 percent growth that analysts had expected — and it was the worst year-over-year performance since 2008, when spending shrank sharply during the Great Recession. In 2011, retail sales climbed 4 to 5 percent during November and December, according to ShopperTrak.

This year's shopping season was marred by bad weather and rising uncertainty about the economy in the face of possible tax hikes and spending cuts early next year. Some analysts say the massacre of schoolchildren in Newtown, Conn., earlier this month may also have chipped away at shoppers' enthusiasm.

Retailers still have time to make up lost ground. The final week of December accounts for about 15 percent of the month's sales, said Michael McNamara, vice president for research and analysis at MasterCard Advisors SpendingPulse.

Still, this season's weak sales could have repercussions for 2013, McNamara said. Retailers will make fewer orders to restock their shelves, and discounts will hurt their profitability. Wholesalers will buy fewer goods and orders to factories will likely drop in the coming months.

Steep discounts weren't enough to get people into stores, said Marshal Cohen, chief analyst at the market research firm NPD Inc.

"A lot of the Christmas spirit was left behind way back in Black Friday weekend," Cohen said, referring to the traditional retail rush the day after Thanksgiving. "We had one reason after another for consumers to say, 'I'm going to stick to my list and not go beyond it.'"

Holiday sales are a crucial indicator of the economy's strength. November and December account for up to 40 percent of annual sales for many retailers. If those sales don't materialize, stores are forced to offer steeper discounts. That's a boon for shoppers, but it cuts into stores' profits.

Spending by consumers accounts for 70 percent of overall economic activity, so the eight-week period encompassed by the SpendingPulse data is seen as a critical time not just for retailers but for manufacturers, wholesalers and companies at every other point along the supply chain.

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