Retailers and Shoppers Observe Low Inventory in the Holiday Season Aftermath

By IBTimes Staff Reporter | December 29 2009 4:08 AM

With the year’s busiest retail season winding down, stores are reporting thin inventories after coming out of Christmas with slightly better-than-expected sales. Some retailers have reported that keeping inventory levels low has resulted in ordering new merchandise to restock shelves, usually rare this soon after the holiday season. While this trend is good news for their bottom lines, it means slim pickings for shoppers hoping for after-Christmas clearance sales.

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NPD analyst Marshal Cohen observed, “Retailers are much more nimble this year. Their ‘Plan B’ is to have new receipts at the ready.” Cohen noted that J. Crew and Coach, among others, had restocked shelves with new items as early as last week.

In a reversal of last year’s trend, retailers found an increase in sales of higher priced items, achieving this by ordering in line with weak demand. The move, critical to winning profits, contrasts with last year’s fire-sale discounts.

After last year’s dismal season, when unplanned discounts 70 percent off or more began appearing well before Christmas, retailers vowed they wouldn’t get caught that way again. This year, the tight control let retailers mostly keep discounts planned, said FBR Capital Markets analyst Adrienne Tennant.

According to MasterCard Advisors’ SpendingPulse, spending rose 3.6 percent in November and December (covering all forms of payment, including cash). Adjusted for an extra shopping day between Thanksgiving and Christmas, the number was closer to a 1 percent rise – still better than the flat sales predicted by analysts.

“The latest holiday shopping season wasn’t a rip-roaring success, but at least it met or slightly exceeded expectations,” said John Lonski, chief economist of Moody’s Capital Markets Research Group. “Consumer spending is indeed in a recovery mode, which brightens prospects for 2010.”

After-Christmas traffic appeared to be relatively robust, though it was hard to measure the amount people actually spent. Roth Capital Partners analyst Elizabeth Pierce visited six malls Saturday in southern California and saw many shoppers without bags. She theorized that shoppers who went looking for bargains left without buying much.

NPD’s Cohen said the season was good enough for most retailers to survive, though many could shutter underperforming stores.

“If a store didn’t generate a profit, it will really be under the microscope,” he said.

Despite the observed changes, a better picture the retail holiday climate will be known Jan. 7, when many will report December sales.