U.S. holiday sales up 0.7% as Washington hurts confidence

U.S. holiday sales growth slowed by more than half this year after gridlock in Washington soured consumers’ moods and Hurricane Sandy disrupted shopping, MasterCard Advisors SpendingPulse said.

Retail sales grew by 0.7% from Oct. 28 through Dec. 24, the Purchase, N.Y., research firm said yesterday (Dec. 25), without providing a dollar figure in the billions. Sales grew at a 2% pace in the same period a year ago. SpendingPulse tracks total U.S. sales at stores and online via all payment forms.

Americans became skittish as Washington approached the end of the year without an agreement to forestall higher taxes and automatic spending cuts – the so-called fiscal cliff. Hurricane Sandy interrupted shopping in stores and online after it slammed into the East Coast in late October. Last month, retailers from Macy’s Inc. to Target Corp. posted same-store sales that trailed analysts’ estimates.

“You are looking at modest to marginal growth from a year ago,” said Michael McNamara, a SpendingPulse vice president. “Weather events and the fiscal debate both anchored the season in terms of growth. The media coverage, which did a good job of explaining the negative consequences of the fiscal cliff, created this negative trend in consumer confidence and spending.”

Consumer confidence fell in December to a five-month low, according to a Dec. 21 report. The Thomson Reuters/University of Michigan consumer sentiment index slid to 72.9, the weakest since July, from 82.7 in November.

Sales in the Mid-Atlantic and Northeast regions, which account for 24% of national consumer spending, contracted 3.9% and 1.4%, respectively, McNamara said. Upper Midwest spending also was hampered by disruptive weather, he said. By contrast, sales in the South and West ranged from about 2% to about 4%, he said.

Luxury sales “struggled,” pulled down by the New York region, which generates 20% of that category’s U.S. sales and was hit hard by the hurricane, McNamara said.

Apparel and consumer electronics sales performed in line with the national average, he said. The only bright spot was home-related merchandise, which benefited from the housing rebound, he said.

Retailers “sabotaged” themselves by not offering greater discounts in the three days before Christmas, said Burt Flickinger, managing director of Strategic Resource Group in New York.

“Instead of having 50-to-70-% off that the retailers had on Black Friday, it was buy one, get 50% off,” Flickinger said. “Shoppers didn’t see the bargains. And the shoppers are bypassing the shopping center, mall-based stores to shop at Amazon.com and other online providers.”

The hurricane also spurred that category, said Robin Lewis, a New York-based retail consultant.

“Sandy reached into people’s holiday pocketbooks to pull money out that we spend on gifts to spend on ruined appliances, household repairs,” Lewis said.

Another restraining factor: the Dec. 14 shooting of 20 children at a Connecticut school, he said.

“The Newtown massacre, psychologically I think, spread through the country,” Lewis said. “This event was not isolated in the Northeast. It slammed the consumer with a lot of sobriety and made us think about what is happening in this world we live in, particularly around the holidays, when things are supposed to be wonderful and peaceful.”

The International Council of Shopping Centers today will update its forecasts for December and holiday sales. On Dec. 18 it reiterated that sales at retailers’ stores open at least a year may climb 3% in November and December, slower than the 3.3% gain last year. The Council predicted retailers will report 4% to 4.5% comparable sales increases for December when they issue their latest monthly reports on Jan. 3.
The New York-based trade group tracks more than 25 chains.

ShopperTrak, a Chicago-based researcher of store traffic, on Dec. 19 trimmed its forecast for November-December holiday sales to a gain of 2.5% from a prior estimate of 3.3%.

The National Retail Federation has said holiday sales will rise 4.1% to about $586.1 billion this year, compared with a 5.6% gain in 2011. Sales for November and December account for 20% to 40% of U.S. retailers’ annual revenue, according to the Washington-based trade group. Last year’s fourth quarter generated 59% of Cincinnati-based Macy’s 2011 profit.

Lewis said he views even marginal growth as good news given the headwinds in the fourth quarter.

For the retail industry, “it’s not going to be, ‘Let’s all break out the champagne. This is an incredible year,’” Lewis said. “It’s: ‘We had a good year, all things considered.’ The consumer was the little train that could.”