Holiday Retail Sales Rise Amid Deep Discounts

Consumers did show up just in time to partially save the holiday season for retailers, according to the National Retail Federation report which showed December retail receipts increased 4.6% year from the year ago period (excluding automobiles, gas stations and restaurants).

The trade group said severe winter weather disrupted consumer spending during the holiday season. But in the end they finally showed up taking advantage of heavy promotions and last-minute deals. Costco’s Jim Sinegal said this week that the 2013 holiday period looked somewhat bleak until the weekend and final two days of the shopping season, when consumers showed up and in droves to finish out their shopping lists.

Total holiday retail sales, which includes November and December transactions rose 3.8% to $601.8 billion, which was in line with NRF’s forecast of 3.9% and $602.1 billion.This does not include the e-commerce sales of $95.7 billion, up 9.3% from last year.

“Despite facing a truncated holiday season, severe weather, and shaky consumer confidence, retailers rose to the challenge and executed their strategies with proven success,” NRF President and CEO Matthew Shay said.

December retail sales, released today by the U.S. Census Bureau, which include categories such as automobiles, gasoline stations, and restaurants, increased 4.1% year-over-year.

Economists warn that despite the total increase in sales receipts year-over-year, retailers won’t likely see fatter profits.

 A number of retailers have already guided down their expectations for the holiday quarter and first reporting period of 2014.

Undoubtedly, some of the sales increase came at the expense of margin. Retailers are still stressed and a long-term promotional environment may actually hurt the bottom line,” said Jack Kleinhenz, chief economist for NRF.
He said as consumer confidence grows, there will be less need for retailers to heavily promote and discount their offerings.

Kleinhenz said 2013 proved to be a volatile year for retail sales amid wide swings in consumer confidence.
“While economic and policy uncertainties remain, the economy seems set for steady growth in the New Year,” he said.

Consumer spending, while selective, is gaining traction, according to Kathy Bostjancic, director of macroeconomic analysis for The Conference Board.

“There might be a falloff in retail sales growth in January, but that has more to do with inclement weather, and will likely be followed by a recovery in February,” she said.

Bostjancic expects the “resilient” American shopper to spend increased wages in the first half of 2014 on replacement furniture and household appliances, even if they are not on sale.

“And that could be the big economic story for the entire first half of 2014,” she added.

December retail sales by category with annual comparison:
• Building material and garden equipment sales increased 4.2%;
• Clothing and clothing accessories increased 4.7%;
• Electronics and appliance stores’ sales decreased 1.5%;
• Furniture and home furnishing stores’ sales increased 5%;
• General merchandise stores’ sales were flat year-over-year;
• Health and personal care sales increased 5.9%;
• Sporting goods, hobby, book and music sales increased 5.8%.