The True Meaning of Christmas

Shoppers disappoint retailers this holiday season

By DANIEL WAGNER, Associated Press

Wed, Dec 26, 2012

WASHINGTON (AP) – U.S. holiday sales so far this year have been the weakest since 2008, when the nation was in a deep recession. That puts pressure on stores that now hope for a post-Christmas burst of spending.

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But stores still have some 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. And the day after Christmas typically is among the biggest shopping days of the year.

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In New York, the Macy’s location at Herald Square also was buzzing with shoppers. Ulises Guzman, 30, a social worker, said he held off buying until the final days before Christmas, knowing the deals would get better as stores got desperate. He said he was expecting discounts of at least 50 percent.

He saw a coat he wanted at Banana Republic for $200 in the days before Christmas but decided to hold off on making a purchase; on Wednesday, he got it for $80.

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Holiday sales are a crucial indicator of the economy’s strength. November and December account for up to 40 percent of annual revenue 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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Online sales, typically a bright spot, grew only 8.4 percent from Oct. 28 through Saturday, according to SpendingPulse. That’s a dramatic slowdown from the online sales growth of 15 to 17 percent seen in the prior 18-month period, according to the data service.

The Media Excuses Are Missing What’s Really Behind Weak Retail Sales

Lance Roberts, Street Talk Live, Business Insider

Dec. 27, 2012, 4:57 AM

The excuses for the weakness, however, were just as much off the mark as the original analysts’ estimates.

While these excuses may play well in the media, in reality, the fiscal cliff, end of October storm and the school shooting had very little to do with retail sales on a nationwide basis.  However, what does have much to do with the level of retail sales are incomes.

Not surprisingly when wages and salaries are growing at a slower rate there is a corresponding weakness in the level of retail sales.  The peak in wages and salaries occurred in early 2011 with the subsequent growth rate trending weaker.  This corresponds with the economy which has continued to muddle along at a very anemic pace.

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The decline in incomes, which can be seen in the roughly 1.2 million person increase in food stamp participation from June to September, is why retail “holiday” spending is weaker.  With credit limits reduced, incomes stagnant and real costs of living on the rise – it is not surprising that retail sales are far weaker than the NRF’s holiday season predictions.