If consumers try a little harder this year, the holiday season has a shot of hiding memories of last year's nightmare for retailers. The retailers are doing their part, with Walmart (WMT), Gap (GPS), RadioShack (RSH), Walgreens (WAG) and many others opening their doors Thanksgiving Day, giving shoppers the opportunity to start their spending early. There's a chance that consumers will spend a bit more this year to thank each other for keeping their belts so tight for so long.
Forecasts of the season's ultimate result remain difficult to pin down. Some expect a year-over-year decline of 3%, and predictions range to an increase of 2%. Credit is harder to come by, and unemployment remains over 10% and at a 26-year high. But, the pressures on spending are offset by pent-up emotion and a stabilizing financial environment -- even if it isn't getting better yet, it doesn't seem to be getting worse.
A survey by professional services firm Deloitte indicates that nearly a third of shoppers are planning to spend more during the holiday season than they thought only one or two months ago. Of this group, 86% expect to spend more on gifts.
And, quite frankly, we're sick of the recession. Says Marshal Cohen of NPD Group, a retail consulting firm, "The recession last year was a shock to the consumer. This year, they are tired of it." He continues, "They might even reward themselves for being frugal for the whole year."
Deeper discounts, likely to be offered as Christmas approaches, should lure more consumers into the stores. The strong performance expected on Black Friday won't be enough to define the entire holiday shopping season, which is why prices may have to come down over the next few weeks. On the biggest shopping day of the year, the National Retail Federation expects 134 million people to hit the stores, up from last year. Traffic on Thanksgiving Day is expected to be lighter but comprised of focused shoppers who are much more likely to make a purchase.
The retailers, however, say they're going to stand their ground. The sorts of discounts used last year to empty the shelves -- and profits -- won't arise again, with Cohen saying markdowns won't pierce the 50% level. Last year, there were multiple at 75%. Lower inventories this year should obviate the need for such deep discounting.
Hopes that the consumer would do his job to stimulate economic growth have pushed retail shares up 47% this year, Reuters says, compared to a 23% gain for the S&P 500. A holiday season that doesn't deliver could lead to a painful decline. Yet, if all goes well, we get not just investment growth but the satisfaction of having been right.
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Reader Comments (Page 1 of 1)
11-26-2009 @ 1:48PM
Peter Van Schaik said...
And that is the good news. Although there are economic reasons for recessions, at some point mob psychology plays a role. In spite of all the focus on the unemployment rate, 42% of the total population are still working and quite a few are bringing in a pile of money. They've been frugal; their balance sheets are improving; they can spend and enjoy the bargains the retailers are dangling before us like shiny carrots on sticks. Sure, the debt of the non-financial sectors is a long term problem but, when you consider the wealth of our nation, the total value of all the assets that stand behind that debt, things aren't really as bad as many of the negative nervous nellies, who seem to spend way to much time blogging, would have us believe. We still have plenty for which to be thankful.
11-26-2009 @ 4:22PM
Loving this price said...
well 10.2% of America isn't going to be spending this holiday season.... that be the unemployment number right ?... or did it slide up to 10.3% with the last 400,000 unemployed ??......
11-26-2009 @ 8:05PM
Peter Van Schaik said...
No, not 10.2 or even 10.3% of America. It's 10.2 or 10.3% of the United States' labor force, two entirely different things. Sure, things could be better for many and unemployment is a very real problem but, no matter how hard you try to spin it to the negative, many in this country have jobs: About 130,848,000, give or take a few, are still employed in non-farm jobs. Focusing on the negative will not help the unemployed one iota. Buying goods and services that our fellow citizens produce will.
11-27-2009 @ 8:49AM
Loving this price said...
10.2% AND COUNTING ..... Sprint just announced more layoffs... another bank chain just got shut down.... The Saab deal fell through.. The Government is asking when the TARP can be paid back... They are talking about a war tax and forced health care, which means less money for the consumer.... Oh yeah.... Reality is the negative spin.... Dubai is claiming poor to get out of debts... if our banks hold those bonds or notes... ouch.. Also that 10.2% number doesn't reflect the number of people on disability or other welfare programs who are seeing their payments cut back or not increased... America will see 20% unemployment before Obama's administration is over.. The DOW should be at about 8600 right now and the S&P at about 900...
11-27-2009 @ 12:08PM
Joseph said...
"Dubai is claiming poor to get out of debts"
Man, that really burns me up. It sounds exactly like what fat, lazy Americans are always doing. I wonder where Dubai picked up the idea such habits?
By the way, have you been out today? The malls are JAMMED.
11-27-2009 @ 2:07PM
MyKisa said...
....yeah, I`m so tired of the recession, I think I will spend myself into a depression...yeah that`s the ticket...change you experience at your own hand
11-27-2009 @ 2:15PM
MyKisa said...
....nice to be all optimistic PETE, but until the control of the money returns to the people, all that upbeat drivel is just that