Apparently, the poor show may force retailers to offer massive post-Christmas discounts with hope of shedding inventory.
While chains like Wal-Mart Stores Inc and Gap Inc are seen to have fared well, analysts expect much less from the likes of book seller Barnes & Noble Inc and department store chain J. C. Penney Co Inc., Reuters has reported.
A MasterCard Advisors SpendingPulse Report that presented the first snapshot of holiday retail sales showed how several factors, including bad weather, rising uncertainty in the economy on the face of tax hikes and deep spending cuts, hit shopping sales this year, the Associated Press (AP) has reported.
It appears to be the worst performance since the spending shrank during the Great Recession. In 2011, retail sales climbed 4 to 5 percent during November-December, according to ShopperTrak.
However, retailers appear to have time to make for the lost ground. The final week of December seems to account for about 15 percent of the month's sales, Michael McNamara, vice president for research and analysis at MasterCard Advisors SpendingPulse, has told the AP.
Retailers will take fewer orders to restock their shelves and discounts will hurt their profitability. Wholesalers will buy fewer goods and orders to factories are likely to drop in coming months.
"A lot of the Christmas spirit was left behind way back in Black Friday weekend," Marshal Cohen, chief analyst at the market research firm NPD Inc told the AP, referring to the traditional retail rush the day after the Thanksgiving holiday in late November.
"We had one reason after another for consumers to say, 'I'm going to stick to my list and not go beyond it.'"
Holiday sales are considered to be a crucial indicator of economy's strength. November and December account for nearly 40 percent of annual retail sales. If sales do not materialize, stores are likely to offer steeper discounts, which may be a boon for shoppers even as it cuts into stores' profits.
Apparently, consumer spending accounts for 70 percent of economic activity. Hence the eight-week period encompassing November and December is viewed as a critical time for manufacturers, retailers, wholesalers and companies at every point of the supply chain.
SpendingPulse data released Tuesday, Dec.25, show how sales measure is widely watched in retail industry and exclude revenue from stores that recently opened or closed, which are volatile. The data capture sales from Oct.28 through Dec.24 across different payment methods.
Bad weather put a damper on shopping sales in the run-up to Christmas. And Superstorm Sandy wrecked havoc in the northeast and Mid-Atlantic States that account for 24 percent of the U.S. retail sales.
The threat of fiscal cliff seems to have put consumers off track again in the second-half of November. Shopping over the past two months appeared to be the weakest in areas affected by Sandy and the more recent winter storm in the Midwest. Sales declined 3.9 percent in the Mid-Atlantic and 1.4 percent in the northeast in comparison to those last year while they rose 0.9 percent in the north central part of the country.
A recent Ipsos poll for Reuters found that only 17 percent of shoppers were spending less due to fiscal cliff fears though analysts said the damage was done.
"The government usually does not have a role in holidays but this year they did. They got right in the midst of it, the timing couldn't have been any worse," NPD's Cohen told Reuters.
The west and southern regions posted gains of 2-3 percent, which still appear to be way below the analysts' expectation for the season.
Online sales that make up 10 percent of total holiday sales grew 8.4 percent from Oct.28 through Dec.23, which was again way below 15 to 17 percent seen prior to the 18-month period, a data service stated.
Stores now appear to be depending on days after Christmas to make up the lost ground. The day after Christmas is typically one of the biggest shopping days of the year.
Trade Group Remains Optimistic
The National Retail Federation, the nation’s largest retail trade group, said Wednesday that the trade group is adhering to its sales forecast for the November and December period to be at 4.1 percent to $586.1 billion this year.
However, it's more than a percentage point lower than the growth in each of the past two years, and the smallest increase since 2009 when sales were up just 0.3 percent, Mydesert has pointed out.