Holiday Sales Not So Merry For Retailers - December 30, 2008

Was it a Merry Christmas for you? For retailers it wasn’t. Even with huge price reductions and promotional sale items, consumers were still affected by the financial crisis that has gripped the country over the past several months.

In a survey by MasterCard’s (MA) SpendingPulse analysis, it showed that retail sales during the holiday season plummeted between 2% and 4%, despite the huge incentives to get cash-strapped shoppers into their stores. Even Cyber Monday, the busiest day of the shopping season, couldn’t save retailers from the economic crunch.

Within the data released earlier today, SpendingPulse provided data that showed that sales of men’s clothing dropped 14% during November and December compared to last year’s results. Additionally, women’s clothing sales plummeted almost 23% during the same period versus last year’s tally.

On top of that, sales from electronics and appliances fell an astonishing 27% from last year’s figures. Footwear sales dropped of by 13.5%, while the luxury sector, mainly jewelry were hit the hardest, falling more than 34%.

Consumer strategists at Global Hunter Securities LLC stated, “The whole pricing system is becoming an old-fashioned bazaar. They’re going into the stores, they’re looking at the stuff, and they’re saying ‘You know what? I know that that price is way too high,’ and they have figured out that the signage doesn’t mean that much.”

Not only are the brick-and-mortar stores taking their lumps, but so too are the online retailers. Within the same MasterCard survey, the data showed that online holiday sales decreased by 2.3%.

As consumers spent less, companies needed to find a way to increase their business position amidst the current economic condition. However, many failed to maintain their doors open. With countless store closing, bankruptcies and takeovers taken place over the past month or so, next months release of retail sales could shape up to be the worst figure in more than 40 years.

When the figures come out next month, the International Council of Shopping Centers (ICSC) projects that 148,000 stores would have closed during 2008. That number compares only with 151,000 closings seen in 2001, the last recession the country went through.

With the economy contracting, retailers may see upwards of 3% of all retail locations shutting their doors forever. In the last survey, held in 2002 by the Bureau of Labor Statistics, the U.S. had some 1.11 million retail locations throughout the nation.

Looking ahead to 2009, the ICSC predicts that more than 73,000 stores will be shut down by retailers in the first half of the year. Leading into the New Year, more than a dozen retailers have already filed for bankruptcy protection.

Included, are companies such as Circuit City, Linens ‘n Things Inc., Sharper Image Corp. and Steve and Berry’s LLC., which have all looked for protection during the credit crisis.

“You’ll see department stores, specialty stores, discount stores, grocery stores, drugstores, major chains either multi- regionally or nationally go out,” said Burt Flickinger, managing director of Strategic Resource Group, a retail-industry consulting firm in New York. “There are a number that are real causes for concern.”

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