THE ASSOCIATED PRESS
Published — Friday 4 January 2013
Last update 4 January 2013 3:49 am
NEW YORK: A last-minute surge in spending may have saved Christmas for stores in the US
Major retailers such as Costco and Nordstrom yesterday reported better-than-expected revenue in December. That comes as a relief for stores that can make up to 40 percent of their annual revenue during the winter holiday shopping period that runs from November through the end of December.
Consumers had a lot to worry about this holiday, including cleanup after Superstorm Sandy and the possibility of the US economy falling off the "fiscal cliff," triggering a massive budget cuts and tax increases that would mean much less money in Americans' pockets. But after spending cautiously during most of the season, they loosened their purse strings in the final shopping days.
"I wouldn't be doing cartwheels that it was particularly great or strong holiday season, but it could have been worse given the headwinds," said Ken Perkins, president of RetailMetrics, a research firm. "The government and Mother Nature were not as cooperative as retailers would have liked. But it was definitely not as bad as feared."
Twenty retailers reported that revenue at stores open at least a year — a figure that indicates a retailers' health — rose an average of 4.5 percent in December compared with the year-ago period, according to the International Council of Shopping Centers. That's on the high end of the expected range of 4 percent to 4.5 percent.
Only a small group of chain stores representing about 13 percent of the $ 2.4 trillion US retail industry report monthly revenue. The list excludes Wal-Mart Stores Inc., the world's biggest retailer. But the data still offers a snap shot of consumer spending, which accounts for 70 percent of all economic activity.
Overall, the combined November and December sales figure rose 2.7 percent, slightly shy of the 3 percent rise the ICSC had predicted.
The numbers provide a brighter picture than mid-December sales reports, which painted the season as the worse since 2008. It winded up being a season of fits and starts, with healthy spending during certain periods followed by stretches of tepid growth.
Nordstrom had a particularly strong December, with revenue at stores open at least a year up 8.6 percent, more than double the 3.4 percent analysts expected. The Seattle-based department store operator said sales were particularly strong in the last week of the season, as shoppers got a full weekend before Christmas, which fell on a Tuesday.
The late surge might have been driven by a last minute increase in markdowns by retailers, said Chris Donnelley, global managing director of Accenture's retail practice.
"The retailers that we work with put more things at 30 percent to 40 percent off on the last weekend before Christmas than they wanted to," Donnelley said. "The volume of product on promotion was a lot higher than anticipated."
Last-minute promotions may have spurred sales, but unplanned discounts can eat into margins, which hurts profits. As a result, several retailers cut their fourth-quarter guidance due to promotions.
Kohl's, for example, said its December revenue at stores open at least a year increased 3.4 percent, beating Wall Street predictions. But the retailer added that the growth came from heavy discounts, particularly unplanned ones late in the holiday season, and it cut its profit outlook for the current quarter and full year.
Cato Corp. and Macy's also cut their guidance for the quarter. And Barnes & Noble had a particularly gloomy holiday with revenue in stores open at least one year down 8.2 percent during the nine-week holiday period ending Dec. 29. The company's Nook e-readers sales fell short of expectations and said it planned to review its strategy for the device.