Holiday Season May End on Soft Note

Zacks

Holiday season is usually the time for shoppers to make the maximum purchases of the year. However, the flagging economy has somewhat dented the consumer confidence, eventually leading to a possibility that this holiday season might end on a soft note.

Further, decision makers are yet to find a solution to the impending "Fiscal Cliff" and that has kept the jitters alive. Analysts are predicting another recession to hit the economy if Republicans and Democrats fail to agree on ways to avert the automatic austerity measures and tax hike before start of next year.

Huge discounts, promotional activities and other buyer-friendly moves by retailers failed to boost consumers’ confidence. Consumers are worried about issues related to personal disposable income, business climate and the economic woes. A report by Thomson Reuters and the University of Michigan reveals that the consumer sentiment has been hit hard due to the ongoing economic impasse, and it fell to 72.9 in December from 82.7 in November.

The retail foot traffic data provider, ShopperTrak stated that both the foot traffic and retail sales dropped 4.4% and 4.3%, respectively, for the week ending December 15 from the prior-year period. The Chicago-based retail analysis firm also trimmed its sales growth forecast for the holiday season, blaming the huge discounts offered by retailers to entice consumers and the adverse impact of Hurricane Sandy that derailed November comparable-store sales.

ShopperTrak now projects holiday sales for November and December period to rise 2.5%, down from 3.3% increase previously forecasted in September 2012. The current estimate also fares unfavorably with 3.7% growth achieved in the prior-year holiday season.

Data compiled by International Council of Shopping Centers (ICSCF) hinted of comparable-store sales growth of 3% during November and December as against 3.3% increase achieved in the prior-year period. For December, ICSC is projecting retail sales to rise between 4% and 4.5%.

National Retail Federation reiterated its holiday sales forecast of a 4.1% jump in November and December period to $586.1 billion, which is short of the 5.6% growth registered last year. A study done by the nation's largest retail trade group and Macroeconomic Advisors hinted that if “Fiscal Cliff” is averted, retail sales may increase 2% to 2.5% in 2013. However, failure to avoid the "Fiscal Cliff" may lead to flat sales or a contraction in the first half of next year.

Sensing the pulse, retailers such as Target Corporation (TGT), Macy’s Inc. (M), Kohl’s Corporation (KSS), Nordstrom Inc. (JWN), Costco Wholesale Corporation (COST), Limited Brands Inc. (LTD) and others have been actively making efforts to win the hearts of bargain hunters. It remains a wait-and-watch story, whether retailers succeed in their endeavors or succumb to the current economic upheaval.

We wish 2013 to mark the resurrection of the U.S. economy with better job prospects.

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