Will generally benign weather outweigh consumers’ exhaustion? That’s the question retailers across the nation are pondering as they start a new year after a better-than-expected holiday shopping season. At least, sales were better than expected, if not retailers’ earnings. Of course, if those retailers are trying to sell winter coats or snowblowers, the springlike January temperatures in much of the country aren’t going to help their results much.
As if the nation’s shopkeepers weren’t already nervous enough about consumers’ ability to keep their wallets open despite all the powerful reasons for them to shut again, Reuters ran a story on Monday titled “Holiday hangover means slow 2012 start for stores.”
“January post-holiday sales are expected to plunge to some of the lowest levels in years, thanks to a surge in credit card spending over the Christmas season,” America’s Research Group Chairman Britt Beemer told Reuters. He added that 2011 credit card usage rose 25% over 2010. “Now that those credit card bills are hitting mailboxes,” he expects a big drop in retail spending this January and February compared to the past few years.
The natural response to the falloff in post-holiday foot traffic will likely be even more discounts to entice shoppers to take yet another trip to the mall. That puts already-margin-squeezed retailers like Target (NYSE:TGT), J.C. Penney (NYSE:JCP), Kohl’s (NYSE:KSS) and Best Buy (NYSE:BBY) — perhaps especially Best Buy — into the unenviable position of having to trim margins even more to keep moving merchandise.
What America’s retailers really need is a consumer that’s confident about staying employed, and even better, assured of take home-pay that’s rising faster than inflation. Since neither of those conditions is anywhere close to materializing, the nation’s merchants will have to keep wishing and hoping — and discounting.