Holiday Season May End on Soft Note - Analyst Blog

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

Meanwhile, politicans have yet to find a solution to the impending "Fiscal Cliff". Analysts are predicting another recession if Republicans and Democrats fail to agree on ways to avert the automatic austerity measures and tax hikes before the start of next year.

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

ShopperTrak stated that both 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 and the adverse impact of Hurricane Sandy.

ShopperTrak now projects holiday sales for November and December to rise only 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 (ICSC) hinted of comparable-store sales growth of 3% during November and December, against a 3.3% increase in the prior-year period. For December, ICSC is projecting retail sales to rise between 4% and 4.5%.

The National Retail Federation reiterated its holiday sales forecast for a 4.1% jump in November and December 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 the “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 these challenges, 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. We'll have to wait and see if their moves are successful. 

COSTCO WHOLE CP (COST): Free Stock Analysis Report

NORDSTROM INC (JWN): Free Stock Analysis Report

KOHLS CORP (KSS): Free Stock Analysis Report

LIMITED BRANDS (LTD): Free Stock Analysis Report

MACYS INC (M): Free Stock Analysis Report

TARGET CORP (TGT): Free Stock Analysis Report

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