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By
Reuters
Published
Dec 19, 2014
Reading time
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US holiday sales may recover with help of deep discounts

By
Reuters
Published
Dec 19, 2014

CHICAGO, USA - Despite a disappointing Thanksgiving weekend, U.S. holiday sales may squeak by expectations if steeper and longer-running discounts lure enough shoppers.

An uptick in last-minute shopping trips on the all-important weekend before Christmas is likely to benefit consumer electronics chains like Best Buy and home improvement retailers like Home Depot and Lowe's the most.

DR


Spending this year has been strongest in these segments, which have consistently offered the deepest discounts, industry consultants said.

On the other hand, apparel retailers are headed for one of their weakest holiday seasons in years. Millennial women are shifting their spending to items like smartphones, televisions and home goods, which are discounted most deeply around the holidays, at the expense of clothes, which go on sale year-round.

Overall, IHS economist Chris Christopher said he saw "momentum building" ahead of Dec. 20, or "Super Saturday," which is expected to surpass the Friday after Thanksgiving as the biggest shopping day of 2014.

Christopher pointed to a 3 percent rise in the ICSC-Goldman Sachs index of chain store sales for the week ended last Saturday as a sign of that momentum. He now believes sales during November and December, the most common definition of the holiday season for retailers, might beat his forecast for 4.2 percent growth.

The growing confidence comes as U.S. unemployment has fallen to a six-year low of 5.8 percent, long-stagnant wages have started to rise, and consumer spending showed signs of increasing during the first two weeks of December.

ShopperTrak, which surveys spending at brick-and-mortar stores, found that sales on Dec. 6 were 3.4 percent higher than the first Saturday of December a year earlier, founder Bill Martin said. This boded well for the remaining shopping days until Christmas, he said.

If anything, Martin said, the final tally is likely to exceed ShopperTrak's holiday growth forecast of 3.8 percent.

Promotions earlier in November took a toll on in-store sales during the Thanksgiving weekend, when shoppers on average spent 6.4 percent less than they did a year earlier.



APPAREL'S PAIN

Despite an expected boost to overall spending this season, Americans' disposable income is still under pressure, industry officials said.

Apparel retailers are likely to suffer most because a large group of their customers - women ages 18 to 35 - are spending their money elsewhere during the holidays, said Kurt Jetta, chief executive of consumer analytics firm Tabs.


Industry consultants said the millennial exodus would hurt teen retailers like Abercrombie & Fitch and brands like J Crew and Levis. With clothing traditionally taking the second-largest share of U.S. holiday sales behind general merchandise, department stores like JC Penney and Macy's , as well as discounters like Wal-Mart and Target , would not be unscathed.

"There is a great migration away from apparel," said Craig Johnson, president of Customer Growth Partners, a private equity firm focusing on consumer products and retailers. "The little growth they are clocking is being done over very discounted pricing so margins this year are going to be weak in most of the category."

Figures compiled for Reuters by payments processor First Data show a 0.1 percent uptick in clothing sales in November even as the value of the average transaction fell 0.3 percent. During the Thanksgiving weekend, spending on apparel rose 3 percent, versus a year-earlier increase of 9 percent.

Along with the gloomy outlook for apparel, some in the retail space expect any overall recovery to be modest.

"The upcoming weekend can help a lot and partly offset the slow growth," CGP's Johnson said, "but it will not turn a lackluster season into a great season."

 

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