Reporting on holiday spending

Despite retailers’ best efforts, holiday spending dropped this year even as more people went to stores. It’s not a great sign for the season if people are watching their budgets instead of taking advantage of the discounts.

Here’s the Wall Street Journal story:

Aggressive discounts on clothes and toys lured slightly more consumers into stores on Thanksgiving and Black Friday this year, but budget-conscious shoppers spent less.

Total spending from Thursday through Sunday fell 3% from a year earlier to $57.4 billion, with shoppers spending an average $407.02, down 4% from $423.55 a year earlier, according to the National Retail Federation.

The retail trade group said the number of people who went shopping over the four-day weekend that kicked off with Thanksgiving rose slightly to 141 million, up from 139 million last year.

As retailers offered some of their biggest promotions a day earlier, store traffic on Thanksgiving Day jumped 27% to 45 million shoppers. As a result, traffic on Black Friday rose just 3.4% to 92 million shoppers.

More consumers decided to bypass stores altogether. Online shopping continued its steady rise over the Black Friday weekend, accounting for 42% of sales racked up over the four-day period, up from 40% last year and 26% in 2006, the trade group said.

The results suggest that the crowds that piled into stores across the country were careful in their spending and the weekend’s added hours didn’t lead to a surge in buying. Retailers have warned that intense promotions this holiday season could hurt margins as they battle for sales in a barely growing market.

The Reuters story had a similar lead as the WSJ story, and went on to note that the week is often a predictor for how much money people will end up spending:

The Thanksgiving weekend is an early gauge of consumer mood and intentions in a season that generates about 30 percent of sales and nearly 40 percent of profit for retailers.

But many have given modest forecasts for the quarter. Wal-Mart Stores Inc said it expects no growth in its U.S. comparable sales, and Macy’s Inc didn’t raise its full-year sales forecast despite strong numbers last quarter.

The shorter holiday period this year – there are six fewer days between Thanksgiving and Christmas compared with 2012 – prompted retailers to begin offering bargains on Monday, earlier than usual, something Shay said likely pulled some sales forward to the first part of the week.

The NRF stuck to its forecast for retail sales to rise 3.9 percent for the whole season.

One problem for some retailers is that if customers expect deep discounts the entire season, it cuts into profit. The Associated Press story had a quote from National Retail Federation CEO highlighting the problem:

Matthew Shay, president and CEO of The National Retail Federation, said that the survey results only represent one extended weekend in what is typically the biggest shopping period of the year. The combined months of November and December can account for up to 40 percent of retailers’ revenue.

Overall, Shay said the trade group still expects sales for the combined two months to increase 3.9 percent to $602.1 billion. That’s higher than the 3.5 percent pace in the previous year.

But to achieve that growth, retailers will likely have to offer big sales events. In a stronger economy, people who shopped early would continue to do so throughout the season. But analysts say that’s not likely to be the case in this still tough economic climate.

“It’s pretty clear that in the current environment, customers expect promotions,” Shay said. “Absent promotions, they’re not really spending.”

Interestingly, Bloomberg chose to use statistics from a different organization that reported sales were up for the season. Lower in the story they used the NRF numbers every other outlet used in the lead:

U.S. retailers eked out a 2.3 percent sales gain on Thanksgiving and Black Friday, in line with a prediction for the weakest holiday results since 2009.

Sales at brick-and-mortar stores on Thanksgiving and Black Friday rose to $12.3 billion, according to a report yesterday from ShopperTrak. The Chicago-based researcher reiterated its prediction that sales for the entire holiday season will gain 2.4 percent, the smallest increase since the last recession.

Retailers offered more and steeper deals on merchandise from flat-screen televisions to crockpots that, while luring shoppers, may ultimately hurt fourth-quarter earnings. Many consumers showed up prepared to zero in on their favored items while shunning the impulse buys that help retailers’ profits.

“You could get the same deals online as you could get in the store, and yet there were still a ton of people out there,” Charles O’Shea, a senior analyst at Moody’s Investors Service in New York, said in an interview. Going out to stores, “is part of the experience,” he said.

While the story might seem mundane, sales during the Thanksgiving weekend are an important indicator of how the year will end for retailers and if they’ll hit their predictions. Analysts, investors and the media, who are likely hoping that customers will open their wallets a bit more this holiday season, are closely watching the numbers.