Blog: Leonie BarrieNovember sales chill

Leonie Barrie | 8 December 2008

A surge in shopping on Black Friday, the day after Thanksgiving, wasn’t enough to bring much seasonal cheer to US retailers in November, despite their attempts to attract shoppers with hefty markdowns and other promotional deals. A brief flurry of spending petered out as the weekend progressed, leaving many stores fearful about what lies ahead in December – a crucial month in the retail calendar. 

But there were also other factors at play in November. A calendar shift this year eliminated a week of holiday shopping from the month’s results, which not only cut into sales but made for tough comparisons with last year when figures included a full week of post-Thanksgiving trade. And for retailers with international operations, a strengthening US dollar cut sales overseas.

On the upside, lower gasoline prices left consumers with a larger disposable income than in recent months, and cooler weather in the east finally spurred sales of winter clothes.

Discounter Wal-Mart Stores continued to be the brightest performer, with aggressive price cuts and new apparel merchandise helping drive a 3.4% rise in same-store sales. Specialty clothing retailer Gap Inc also surprised, with a sales decline that was less than had been expected. But department stores continued to disappoint, with Macy's posting a 13.3% same-store sales decline.

Looking ahead to December, initial signs suggest consumers are already further ahead in their shopping than they were a year ago – which is not good news for retailers as it points to traffic and sales slowing over the next few weeks.

Stores will also need to offer even more aggressive discounts to entice shoppers who are sticking to tight budgets and are now on the lookout for items that have been marked down. But this will probably hurt fourth-quarter earnings as the price cuts eat into retailers’ margins. There are also fewer days between Thanksgiving and Christmas this year, so retailers will have to work even harder to make up lost ground.

Consultancy TNS Retail Forward is warning of “grim” holiday sales – but also suggests sales should begin to bottom out in December. It adds that business will continue to skew toward value-driven retail formats like discount stores, supercenters and warehouse clubs.

 


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