Retailers Seduced Shoppers With Deals In December In Spite Of Sluggish Economy

Shoppers didn't hold back this holiday season -- at certain stores, that is. According to data released Thursday, luxury and mid-range retailers seduced customers in December, while discounters like Target missed sales estimates.

The 3.4 percent increase in same-store sales reported by Thomson Reuters was better than expected -- an optimistic sign in an ailing economy. Still, it's unclear how often people will shop in the upcoming year, a factor that will depend more on whether they find jobs than on how much retailers innovate or drop prices.

"Consumers were feeling better about loosening up purses this holiday season," said Jharonne Martis, director of research for Thomson Reuters. In particular, big wins in the apparel and teen apparel sectors indicated that shoppers were willing to spend not only on necessities, but on discretionary items like new clothes and shoes, Martis said.

Same-store sales, which measure changes in sales at stores open at least one year, are released at the start of each month by 25 of the largest U.S. retailers. Same-store sales of at least 3 percent indicate a healthy U.S. consumer, according to Martis.

Nordstrom and Macy's were among the biggest winners with 8.7 and 6.2 percent sales increases, respectively. Saks and Dillard's also did well, with 5.8 and 4.0 percent increases.

TJX Companies, owner of T.J. Maxx and Marshalls, saw its same-store sales increase by 8 percent. In overall apparel sales, Martis said this was able to counter the miss by Gap Inc., which saw sales decline by 4 percent in December. Victoria's Secret, part of Limited Brands, also saw one of the largest successes with an 11 percent increase.

Not that such successes came easily. It was a "very aggressive, promotional holiday environment," as Amie Preston, chief investor relations officer of Limited Brands, said on the company's December sales call. Other retailers, like TJX Companies, made similar comments about the importance of value to this round of holiday shoppers.

Successful stores had no choice but to drop prices, extend hours and aggressively advertise to get people in the door -- all of which made profits difficult. "It was one of the most promotional seasons we've seen in a long time, and very event driven," said Ken Perkins, president of Retail Metrics, a retail research and consulting firm. "This puts a lot of pressure on margins."

Data showed that consumers held out from hitting stores until the very best deals were offered, or until the last minute before Christmas. According to ShopperTrak, which monitors retail foot traffic, sales jumped 37.8 percent in the last week before Christmas, a much larger increase in that period than in 2010.

Oddly, some of the big discount stores known for consistently low prices weren't able to attract this year's shoppers. Target missed estimates by 1.5 percent and Fred's and Kohl's actually saw same-store sales decline by 0.4 and 0.1 percent in December, respectively.

But this doesn't necessarily mean that people weren't looking for discounts. Rather, more kinds of retailers are now competing for the same price-conscious shopper. In addition to traditionally mid-range department stores like Macy's offering more deals, a growing crop of dollar stores have prices that can beat even those at Walmart.

"Discounters, big names like Target and Walmart have lost a lot of market share to dollar stores," said Martis of Target's disappointing sales. Walmart, which doesn't announce monthly results, will release holiday sales data in February with its latest earnings.

On Tuesday, Dollar General announced that it will be opening 625 new stores in 2012. On Thursday evening, Family Dollar will announce its latest earnings, which are expected to include strong same-store sales of between 4 and 6 percent.

Meanwhile, a struggling Sears Roebuck, once America's most prominent middle-class retailer, announced last week that it will be closing 100 to 120 of its Sears and Kmart stores.

Unfortunately for the economy, healthy December sales numbers don't necessarily indicate a fertile retail landscape for 2012. With few big shopping holidays or sale days like Christmas or Black Friday in the near future, there's a potential for retail sales to be soft, according to Perkins.

Without the continued addition of jobs, the divide between retail winners and losers -- as well as between luxury and middle class spending -- is likely to become even sharper than it was in December.

"I have deep concerns about the erosion of the middle class and their ability to spend so much," Perkins said. "Much of the economy ultimately rests on their shoulders."

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Source: http://www.huffingtonpost.com/2012/01/05/retailers-shoppers-deals-december_n_1186465.html

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