Blog: A dismal December
Leonie Barrie | 9 January 2009
As expected, US retail sales took a major hit in December after heavy discounting and promotions largely failed to halt slumping sales and cut into margins instead. Indeed, a wave of profit warnings suggests there is little likelihood of any sort of rebound for the sector in the first half of 2009.
But not only was the weak economy, threat of job losses, and tighter credit to blame for consumers cutting back on all but the most essential purchases: severe winter weather in some regions also hampered traffic.
And while some shoppers tried to out-smart retailers by waiting until the last minute to make their purchases in the hope of getting even bigger discounts, post-Christmas bargain hunters spent too little, too late.
Of course there were some winners on the results front, but these were few and far between. American Apparel, The Buckle, Aeropostale and Urban Outfitters are among those who saw their same-store sales rise in December.
Among the losers though, Gap, J Crew, Abercrombie & Fitch, Limited Brands, Target Corp all cut forecasts.
Perhaps the biggest surprise came from discount giant Wal-Mart, which disappointed with a same-store sales rise of just 1.7% falling short of expectations, and lowered its fourth quarter profit forecast. Until now its results have held up as cash-strapped consumers trade down to its stores.
Macy's went a step further, cutting its fourth-quarter and full-year earnings outlook and revealing plans to close 11 underperforming stores.
There’s more bad news looming for January, when sales are unlikely to get their traditional holiday gift card lift.
And perhaps an even bigger challenge will be to get shoppers to pay full price again. After all, they’ve became accustomed to prices being slashed over the past couple of months and could well start to expect discounts as the norm, especially when they know retailers have spring merchandise they’re desperate to shift.
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