Retailers may not see a sales surge this weekend as ho-hum discounts and fears about imminent tax hikes and cuts in government spending give Americans fewer reasons to open their wallets in the last few days before Christmas.
The acrimonious debate in Washington over how to avoid the so-called “fiscal cliff” is one of a number of concerns weighing on shoppers, experts said, as consumers head to malls on the last Saturday ahead of the holiday – typically one of the busiest shopping days of the year.
“I don’t think we’re going to get a great pickup in the last few days here,” said Ron Friedman, retail practice leader at consulting firm Marcum LLP, explaining how the uncertainty related to the “cliff” was weighing on American minds.
Some shoppers agreed.
“That whole fiscal cliff thing is a bit nerve-wracking, and we’re trying to save a bit of money for some (home construction) projects next year,” Emma Carrington, 43, said while shopping at the Westfield Old Orchard Mall in Skokie, Illinois.
The mother of three, who was at a Barnes & Noble store on Saturday to buy her husband a Nook e-reader, said she was spending less than last year.
Many others are also being cautious.
“We just try to stay on a budget. We’re not going crazy,” said Tom Chowinski, a market researcher at Nielsen, who was shopping with his wife for their four adult children on Saturday morning at a Wal-Mart store in Westbury, New York.
U.S. consumer sentiment plummeted in December as Americans were unnerved by ongoing negotiations. The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment tumbled to 72.9 from 82.7 in November, worse than forecasts for 74.7. It was the lowest level since July.
“Whenever you introduce anxiety, it will have an impact on shoppers’ spending,” especially those who shop on credit, said Kevin Regan, senior manager director at FTI Consulting.
Some, like New Yorker Linda Hampton, shopping at a Best Buy store, hope lawmakers will somehow avert the “cliff.”
“It would be a disaster. Our taxes will go up. But I think our president will step in,” Hampton said.
“What could have been a merry Christmas is going to turn to a ho-hum Christmas, and we can thank our, you know, politicians for getting in the middle of it all,” NPD analyst Marshal Cohen said. “This great unknown puts a big damper on the consumer feeling confident to go out and spend more.”
Malls from New York to Illinois to California had modest crowds on Saturday, but experts said shoppers could simply be procrastinating. Unlike the past couple of years, when Christmas fell on a weekend, the holiday falls on a Tuesday this year, giving last-minute shoppers more breathing room.
Also, many retailers were still offering free shipping and promising to deliver items by Christmas Eve.
“The traffic you see out and about may not necessarily give you the full picture,” said Ramesh Swamy, an analyst at Deloitte.
Shoshana Pucci, senior marketing manager at Glendale Galleria in Southern California, said she expected these shoppers to even make multiple visits rather than do all their last-minute shopping in one go on Saturday.
The holiday quarter can account for about 30 percent of annual sales and half of profit for many chains.
More than 60 percent of U.S. consumers have already finished more than three-quarters of their holiday shopping, according to a Reuters/Ipsos poll released on Thursday. This means retailers will have to bait shoppers with big discounts to get them to open their wallets in the last lap of the holiday race.
While Cohen and Friedman expected retailers to pull out all the stops this weekend to woo last-minute shoppers, some others expected discounts to be less aggressive since retailers did a better job of managing inventory this year.
“Customers will not be finding deals as good as last year,” said Scott Tuhy, a vice president at Moody’s. “I haven’t seen 60-70 percent off sales as much.”
While Barnes & Noble offered 25 percent off on any one item except Nook products, Ann Inc’s Loft chain offered 50 percent off on everything except new arrivals. Gap offered 40 percent off on all denims, while Victoria’s Secret advertised $5 lacie panties and $10 off some yoga wear.
Stores of Macy’s and Nordstrom were some of the busiest at Roosevelt Field mall in Garden City, on New York’s Long Island, but crowds were moderate at the J.C. Penney store.
This week, research firm ShopperTrak lowered its sales forecast for November and December and now expects sales to be up 2.5 percent, rather than up 3.3 percent.
Many retailers reported record traffic on Thanksgiving Day and the subsequent weekend, but several, including Macy’s Inc and Saks Inc, lost a lot of business in early November because of Superstorm Sandy.
Sales for the November-December holiday season look set to rise 4.1 percent to $586.1 billion this year after a 5.6 percent increase in 2011, according to the National Retail Federation.
“Retailers are going to be pretty challenged this year in trying to get beyond all this,” Cohen said, referring to a string of events this holiday season that have weighed on U.S. shoppers including the hurricane, gridlock in Washington and the December 14 shooting at an elementary school in Connecticut.
NRF sees 2013 retail sales rising about 2 to 2.5 percent if the fiscal cliff is averted. If not, sales would be essentially flat for the year, the trade group estimated in a study with Macroeconomic Advisers.
Copyright 2012 Thomson Reuters