(Corrects spelling of analyst's name in paragraph 15 to Marshal
Cohen, not Marshall Cohen)
* MasterCard SpendingPulse sees growth under 1 pct
* Retail stocks sink in Wednesday trade
* Analysts warn of deep discounts to cut inventory
Dec 26 (Reuters) - The 2012 holiday season may have been the
worst for retailers since the financial crisis, with sales
growth far below expectations, forcing many to offer massive
post-Christmas discounts in hopes of shedding excess inventory.
While chains like Wal-Mart Stores Inc and Gap Inc
are thought to have done well, analysts expect much less
from the likes of book seller Barnes & Noble Inc and
department store chain J. C. Penney Co.
Growth was always expected to slow this season, though an
improving employment picture and rising home values had helped
mitigate the worst fears. But then Superstorm Sandy hit the East
Coast in late October, mild weather blunted sales of winter
clothing and rising concern about the "fiscal cliff" became more
of a reality, dragging down already pessimistic forecasts.
"The broad brush was Christmas wasn't all that merry for
retailers, and you have to ask what those margins look like if
the top line didn't meet their expectations," said Kim Forrest,
senior equity research analyst at Fort Pitt Capital Group.
The latest sign of trouble came from MasterCard Advisors
Spending Pulse, which reported holiday-related sales rose 0.7
percent from Oct. 28 through Dec. 24, compared with a 2 percent
increase last year.
The preliminary estimate from SpendingPulse was in line with
other estimates showing weak growth during the holiday season,
when retailers can book about 30 percent of annual sales -- and
in many cases, half of their profits.
"It has been a very uneven industry performance, probably at
least for the last year, and that certainly continued into the
holiday season," said Michael Niemira, chief economist at the
International Council of Shopping Centers, in an interview with
The latest holiday season could end up the weakest since
2008, during the last recession, when sales actually declined.
The National Retail Federation had previously predicted 4.l
percent sales growth this year, versus a 5.6 percent increase a
Markets reacted sharply to the gloomy outlook.
The S&P retail index fell 1.8 percent in midday
trading Wednesday, and 16 of the top 20 decliners in the broader
S&P 500 were retailers or consumer brands.
To be sure, the actual percentage change in holiday sales
can differ substantially, depending on which group is composing
the figure. SpendingPulse and the National Retail Federation,
for example, look at different categories, which can cause some
variation in their forecasts.
Regardless of how bad the figure is, one concern for
retailers is that soft sales will mean an excess of inventory
that will force some to slash prices.
Among other brands, Barnes & Noble offered 50 percent
discounts in stores via email promotions on Wednesday, while Ann
Inc had half-off at its Loft stores, and Bloomingdale's
promoted discounts of up to 75 percent in some cases.
Even in a good year, retailers would have offered discounts
to lure customers, but some suggest a weak year has now forced
"Retailers are no longer chasing sales, they are chasing
inventory management. That means the discounts that they
would have liked to be at 50-60 (percent) off have climbed to 75
to even 80 (percent) off," said Marshal Cohen, chief industry
analyst at The NPD Group.
Erica Ayala, 31, a mother of four who lives in New York's
Harlem neighborhood, waited until the day after Christmas to
shop for that very reason, saving more than $150 on kids'
clothes alone at Gap's Old Navy chain.
"You can't go wrong with that," she said.
SANDY AND CLIFF
A variety of factors were thought to be at fault for the
weak season, starting with Superstorm Sandy, which depressed
sales in the Northeast in late October and early November.
Sales recovered in the second part of November, with early
hours and promotions helping drive traffic during the "Black
Friday" weekend after Thanksgiving, analysts said.
But there was a deep lull in early December as a winter
storm in parts of the United States may have limited sales, said
Michael McNamara, vice president of research and analysis at
On top of that, there were fears that taxes will rise in the
new year if Washington cannot negotiate a solution to the
end-of-year "fiscal cliff" dilemma.
A recent Ipsos poll for Reuters found that only 17 percent
of shoppers were spending less due to cliff fears, though
analysts said the damage was still done.
"The government usually does not have a role in holidays but
this year they did. They got right in the midst of it, the
timing couldn't have been any worse," NPD's Cohen said.
One bright spot has been online sales, which continue to
grow at a faster pace.
On Christmas Day, online sales jumped 22.4 percent,
outpacing the 16.4 percent increase in 2011, according to IBM
Digital Analytics Benchmark, which tracks more than 1 million
e-commerce transactions a day from 500 U.S. retailers.
Whether online or off, some of the winning retailers were
expected to be Wal-Mart, which attracted shoppers with early
deals on the night of Thanksgiving and kept its focus on value,
and apparel chains like Gap Inc, whose bright sweaters
were successful, according to analysts.
Toys sold well, and hot items that were harder to find later
in the season included certain Mattel Inc Barbie dolls
and LeapFrog Enterprises Inc's LeapPad2 tablet computer,
according to B. Riley Caris analyst Linda Bolton Weiser.
For retailers who have struggled, analysts said all hope was
not lost. Many have fiscal quarters that end in January, so they
still have time to benefit from a post-Christmas rebound.
Because Christmas fell on a Tuesday, some said they could even
see a boost this week from people who have extra time off.
"There's still a little bit more time to go until the
holiday season is officially over," Morningstar analyst Peter
(Reporting by Brad Dorfman, Nivedita Bhattacharjee and Jessica
Wohl in Chicago, Additional reporting by Chuck Mikolajczak and
Dhanya Skariachan in New York; Writing by Ben Berkowitz; Editing
by Jeffrey Benkoe)