Check out shoppers with fresh credit loosening their purse strings a bit - at least for now.
“There’s no question there’s some pent-up demand,” as over the past three months consumers saved and paid off their credit cards bills instead of spending, said Stifel Nicolaus retail analyst Richard Jaffe.
Now, “the credit cards are reloaded and the consumer has the ability to spend” on both holiday gifts and personal items such as clothes they had been holding off from buying, amid rising food and gas prices, falling housing values and shrinking credit availability.
Still, many leading U.S. retailers reported steep drops in November sales at stores open more than a year, as bargain seekers at the beginning of the holiday shopping season were unable to save a very tough month.
When those holiday promotions taper off, consumers with lingering credit card debt from holiday gift-giving and less discounted items will likely put the brakes on spending yet again, says Jaffe.
Also in the basket:
Safeway to cut costs, prices in 2009; shares rise (Reuters)
Rite Aid posts flat November same-store sales (Reuters)
Mattel wins court ban of MGA’s Bratz dolls (Reuters)
(Photo/Reuters)
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Black Friday: A Great Start, but Show Me the Money!
With a combination of deep discounts, “two-fer” sales and early bird specials, retailers did better than expected—at least that’s according to the National Retail Federation (NRF). The NRF reports that more than 172 million shoppers hit stores and websites between Thanksgiving Thursday and Sunday, which is 25 million more than shopped last year. They are also reporting that shoppers spent an average of $372.57, up 7.2 percent over last year’s $347.55 for an estimated total expenditure of $41.0 billion.
While it’s still way too early to draw any real conclusions, they predict a 2.2 percent increase, or about $470 billion, in total holiday sales. Well, that all sounds rosy, but bear in mind that the NRF is a retailer’s trade association. That means they are the Cheerleaders of Shopping. And what is a cheerleader’s job? It’s to pump you up. Naturally they want to couch things in the best of terms possible even before anybody knows what the actual numbers are. Remember the mantra of herd mentality: if everyone else is doing it, it must be OK.
Since two-thirds of our economy is based on the spending of the U.S. consumers, without consumer spending it’s going to be hard for the economy to get much traction. But a strong opening weekend does not automatically translate into a strong holiday season for retail. After all, shoppers were looking for the deepest possible discounts this year, given the state of the economy, so a majority of the sales went to discount and mall-based retailers like WalMart. It’s hard to say how this flurry of activity will translate into profits. I suspect retailer’s gross margins are going to suffer after adding in expenditures before arriving at their actual operating income. This is key as I stated in the recent release book I co-authored called “The Big Gamble: Are you investing or Speculating?
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- Posted by jose D. Roncal