Shoppers disappoint retailers this holiday season

Shoppers walk past an H&M location, Wednesday, Dec. 26, 2012, in New York. This holiday season is shaping up to be the weakest since the country was in the middle of a deep recession in 2008. That not only shows that stores misread Americans' willingness to spend during this period of economic uncertainty. It also could indicate that the days of throngs of shoppers spending thousands of dollars willy nilly on holiday gifts may be long gone.

Shoppers walk past an H&M location, Wednesday, Dec. 26, 2012, in New York. This holiday season is shaping up to be the weakest since the country was in the middle of a deep recession in 2008. That not only shows that stores misread Americans' willingness to spend during this period of economic uncertainty. It also could indicate that the days of throngs of shoppers spending thousands of dollars willy nilly on holiday gifts may be long gone.

WASHINGTON — 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.

This year's holiday season was marred by bad weather and 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.

Sales for the two months before Christmas increased 0.7 percent compared with last year, according to a MasterCard Advisors SpendingPulse report. That's below the healthy 3 to 4 percent growth that analysts had expected — and the worst year-over-year performance since 2008, when spending shrank sharply during the Great Recession.

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.

Indeed, there was a crowd equivalent to a busy weekend day at Lenox Square Mall in Atlanta by midday on Wednesday. Laschonda Pitluck, 18, a student in Atlanta, had held off earlier because she's a student and saving all her money for college. Last year she spent over $100 on gifts but this year she's keeping it under $50.

She found 50 percent off things she bought, including a hoodie and jeans for herself at American Eagle and a shirt at Urban Outfitters. She said she would have bought the clothes if they hadn't been 50 percent off.

"I wasn't looking for deals before Christmas, I waited until after," she said. She bought boxers for her boyfriend, and was looking for a hat but couldn't find one.

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.

"I'm not looking at anything that's original price," he said.

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.

The SpendingPulse data released Tuesday, which captures sales from Oct. 28 through Dec. 24 across all payment methods, is the first major snapshot of holiday retail sales. A clearer picture will emerge next week as retailers like Macy's and Target report revenue from stores open for at least a year. That sales measure is widely watched in the retail industry because it excludes revenue from stores that recently opened or closed, which can be volatile.

In the run-up to Christmas, analysts blamed bad weather for putting a damper on shopping. In late October, Superstorm Sandy battered the Northeast and mid-Atlantic states, which account for 24 percent of U.S. retail sales.

Shopping picked up in the second half of November, but then the threat of the country falling off a "fiscal cliff" gained strength, throwing consumers off track once again.

Lawmakers have yet to reach a deal that would prevent tax increases and government spending cuts set to take effect at the beginning of 2013. If the cuts and tax hikes kick in and stay in place for months, the Congressional Budget Office says the nation could fall back into recession.

Shopping over the past two months was weakest in areas affected by Sandy and a more recent winter storm in the Midwest. Sales declined by 3.9 percent in the mid-Atlantic and 1.4 percent in the Northeast compared with last year. They rose 0.9 percent in the north central part of the country.

The West and South posted gains of between 2 percent and 3 percent, still weaker than the 3 percent to 4 percent increases expected by many retail analysts.

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.

Online sales did enjoy a modest boost after the recent snowstorm that hit the Midwest, McNamara said. Online sales make up about 10 percent of total holiday business.


Gwinnettsince1991 1 year, 12 months ago

What we have is no faith in Washington. I see no leadership of any kind and with my taxes about to go up, i had to cut back this year. Leadership isn't getting everything you wanted, its sitting down and working our something that works for everyone.


NewsReader 1 year, 12 months ago

I don't understand...what with all the economic certainty and our wonderful new Obamacare program getting under way in a week , there's really no reason people shouldn't be spending themselves into oblivion.


BurritoJones 1 year, 12 months ago

Just making sure someone blamed this on Obama. I'd hate for you all to miss an opportunity to shoehorn yet another topic into somehow being What Obama's Screwing Up Today(TM).


news2me 1 year, 12 months ago

Selective memory problems? Bush was blamed for everything during his 8 years by people like you. Obama has only had 4, so get used to it. He'll do more destruction in his next 4 even if he just sits and does nothing. His mere presence on the thrown is eroding our country.


BurritoJones 1 year, 12 months ago

Well I'm glad we're conducting ourselves maturely.

Although frankly I'm not sure what I'm more troubled by: the fact that you think the office of the President is a throne, or that you can't spell "throne."


news2me 1 year, 12 months ago

Taco: I made a usage error, the word is spelled correctly. Get your facts straight and stop avoiding the obvious. Speaking of maturity, I have never had one of my posts removed by the mods:

BurritoJones 1 month, 1 week ago on Malls announce Black Friday hours

This comment was removed by the site staff for violation of the usage agreement.

Frankly, I am troubled by the fact you can't remember the liberal mantra from the 2000 - 2008 ... Bush's Fault (TM).


SurelyNot 1 year, 12 months ago

Got another notice about increased healthcare costs. And BurritoJones wonders why people blame it on Obamacare. Well, there has never been an increase like the two I have gotten this year. In addition, I have no idea what my taxes will be like. So, why should I have spent recklessly? Sorry the economy isn't improving for the retailers. Didn't many predict this would happen...was anybody who voted for Obama listening? Denial???


BurritoJones 1 year, 12 months ago

Premiums have gone up. True. I guess let's not pay attention to the fact that your increased premiums have bought small businesses a tax credit for offering health insurance. Or that your health care plan for your children during their 20s is no longer "don't get sick." Or that the law now states that your insurance company has to actually spend your money on health care.

And let's certainly not pay attention to the fact that several million children can now see a doctor as opposed to clogging up our ERs. No. What really matters is that your premiums went up.

The fact that you look at your insurance companies raising your premiums and you blame the issue on ObamaCare is tantamount to you blaming Budweiser for the drunk that hit your mailbox with his car.


news2me 1 year, 12 months ago

SurelyNot - Did you notice how Burrito does the Mexican hat dance around your increased healthcare costs and not His? He never mentions His premiums and costs going up! Taco also proclaims this is about the "children", when in reality it is about him and his inability to be the big enchilada and pay for his own healthcare. Maybe some of those children are his illegal kin that he wants Obamacare to take care of. Who knows with people like Burrito!

Obama and entitlement junkies like Burrito are the reason Holiday sales are dismal. Everything that we face, his royal highness Obama has touched. Let's not forget the people like Burrito that gave Obama his power.

The reason for the season is not Obama ...


dentaldawg83 1 year, 11 months ago

Modern retail models are going the way of the horse and buggy. Retailers will have to realize that large expensive stores stocked with 1000's of crappy products, employing a high number of unskilled workers is no longer a viable model in the 21st century. We shoppers are literally offered 1000's of alternatives to buy when most of us would be fine with a choice between 2 or 3 things depending on our needs. Plus online purchases are only going to increase in the coming years. Newer models like buyers' clubs (Sams, Costco) and smaller stores costing a lot less in rent and local taxes, employing fewer folks are going to replace the current inefficient stores. The "New Normal" means consumers have a lot less discretionary funds and simply will not have the wherewithall to stroll through Malls looking for some overpriced crap to buy. Welcome to the 21st century Retailers.


SurelyNot 1 year, 11 months ago

Wonder what song many will sing about the third week in Jan when all the tax hikes go up on EVERYONE. Some actually thought it was only going up on those making $2500000+. Surprise, surprise! We are all included in th is. Inclusion is the name of the game. Work harder for more who don't. Spread the wealth...isn't that about the essence of what he said? We got it.


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