Washington gridlock blamed for slow holiday sales

Dec 26 2012 - 2:09pm

Images

In this Thursday, Dec. 20, 2012 photo, holiday shoppers make their way through The Mall at Millenia in Orlando, Fla. U.S. holiday retail sales this year are the weakest since 2008, after a shopping season disrupted by storms and rising uncertainty among consumers. A report out Tuesday that tracks spending, called MasterCard Advisors SpendingPulse, says holiday sales increased 0.7 percent. Analysts had expected sales to grow 3 to 4 percent. (AP Photo/John Raoux)
In this Wednesday, Dec. 19, 2012, photo, a customer shops for greeting cards at a Target store in Chicago. U.S. holiday retail sales this year are the weakest since 2008, after a shopping season disrupted by storms and rising uncertainty among consumers. A report out Tuesday, Dec. 25, 2012, that tracks spending, called MasterCard Advisors SpendingPulse, says holiday sales increased 0.7 percent. Analysts had expected sales to grow 3 to 4 percent. (AP Photo/Nam Y. Huh)
In this Thursday, Dec. 20, 2012 photo, people walk through the Fashion Island shopping center in Newport Beach, Calif. U.S. holiday retail sales this year are the weakest since 2008, after a shopping season disrupted by storms and rising uncertainty among consumers. A report out Tuesday, Dec. 25, 2012, that tracks spending, called MasterCard Advisors SpendingPulse, says holiday sales increased 0.7 percent. Analysts had expected sales to grow 3 to 4 percent. (AP Photo/Chris Carlson, File)
In this Thursday, Dec. 20, 2012 photo, holiday shoppers make their way through The Mall at Millenia in Orlando, Fla. U.S. holiday retail sales this year are the weakest since 2008, after a shopping season disrupted by storms and rising uncertainty among consumers. A report out Tuesday that tracks spending, called MasterCard Advisors SpendingPulse, says holiday sales increased 0.7 percent. Analysts had expected sales to grow 3 to 4 percent. (AP Photo/John Raoux)
In this Wednesday, Dec. 19, 2012, photo, a customer shops for greeting cards at a Target store in Chicago. U.S. holiday retail sales this year are the weakest since 2008, after a shopping season disrupted by storms and rising uncertainty among consumers. A report out Tuesday, Dec. 25, 2012, that tracks spending, called MasterCard Advisors SpendingPulse, says holiday sales increased 0.7 percent. Analysts had expected sales to grow 3 to 4 percent. (AP Photo/Nam Y. Huh)
In this Thursday, Dec. 20, 2012 photo, people walk through the Fashion Island shopping center in Newport Beach, Calif. U.S. holiday retail sales this year are the weakest since 2008, after a shopping season disrupted by storms and rising uncertainty among consumers. A report out Tuesday, Dec. 25, 2012, that tracks spending, called MasterCard Advisors SpendingPulse, says holiday sales increased 0.7 percent. Analysts had expected sales to grow 3 to 4 percent. (AP Photo/Chris Carlson, File)

WASHINGTON - U.S. holiday sales growth slowed by more than half this year after gridlock in Washington soured consumers' moods and Hurricane Sandy disrupted shopping, MasterCard Advisors SpendingPulse said.

Retail sales grew by 0.7 percent from Oct. 28 through Monday, the Purchase, N.Y., research firm said Wednesday without providing a dollar figure in the billions. Sales grew at a 2 percent pace in the same period a year ago. SpendingPulse tracks total U.S. sales at stores and online via all payment forms.

Americans became skittish as Washington approached the end of the year without an agreement to forestall higher taxes and automatic spending cuts, the so-called fiscal cliff. Hurricane Sandy interrupted shopping in stores and online after it slammed into the East Coast in late October. Last month, retailers from Macy's to Target posted same-store sales that trailed analysts' estimates.

"You are looking at modest to marginal growth from a year ago," Michael McNamara, a SpendingPulse vice president, said in a telephone interview Tuesday. "Weather events and the fiscal debate both anchored the season in terms of growth. The media coverage, which did a good job of explaining the negative consequences of the fiscal cliff, created this negative trend in consumer confidence and spending."

The International Council of Shopping Centers reiterated Wednesday that it expects sales at retailers' stores open at least a year to climb 3 percent in November and December, slower than the 3.3 percent gain last year.

Sales increased 0.7 percent in the week ending Dec. 22 from a week earlier, ICSC said in a statement. It predicted stronger sales this week, benefiting from purchases in the two days before Christmas. Clearance sales and gift card redemption will spur sales, said Michael Niemira, ICSC vice president and chief economist.

Niemera said he doesn't expect retailers to resort to "huge across-the-board type of reductions" in after-Christmas sales.

The New York-based trade group maintained its projection that retailers will report comparable sales increases of 4 percent to 4.5 percent for December when they issue their latest monthly reports Jan. 3. ICSC tracks more than 25 chains.

Consumer confidence fell in December to a five-month low, according to a Dec. 21 report. The Thomson Reuters/University of Michigan consumer sentiment index slid to 72.9, the weakest since July, from 82.7 in November.

Sales in the Mid-Atlantic and Northeast regions, which account for 24 percent of national consumer spending, contracted 3.9 percent and 1.4 percent, respectively, McNamara said. Upper Midwest spending also was hampered by disruptive weather, he said. By contrast, sales in the South and West ranged from about 2 percent to about 4 percent, he said.

Luxury sales "struggled," pulled down by the New York region, which generates 20 percent of that category's U.S. sales and was hit hard by the hurricane, McNamara said.

Apparel and consumer electronics sales performed in line with the national average, he said.

The only bright spot was home-related merchandise, which benefited from the housing rebound, he said.

The hurricane also spurred that category, Robin Lewis, a New York-based retail consultant, said Tuesday.

"Sandy reached into people's holiday pocketbooks to pull money out that we spend on gifts to spend on ruined appliances, household repairs," Lewis said.

Another restraining factor: the Dec. 14 shooting of 20 children at a Connecticut school, he said.

"The Newtown massacre, psychologically I think, spread through the country," Lewis said. "This event was not isolated in the Northeast. It slammed the consumer with a lot of sobriety and made us think about what is happening in this world we live in, particularly around the holidays, when things are supposed to be wonderful and peaceful."

Retailers "sabotaged" themselves by not offering greater discounts in the three days before Christmas, Burt Flickinger, managing director of Strategic Resource Group in New York, said Wednesday in an interview with Bloomberg Radio.

"Instead of having fifty to seventy percent off that the retailers had on Black Friday, it was buy one, get fifty percent off," Flickinger said. "Shoppers didn't see the bargains. And the shoppers are bypassing the shopping center, mall-based stores to shop at Amazon.com and other online providers."

ShopperTrak, a Chicago-based researcher of store traffic, on Dec. 19 trimmed its forecast for November-December holiday sales to a gain of 2.5 percent from a prior estimate of 3.3 percent.

The National Retail Federation has said holiday sales will rise 4.1 percent to about $586.1 billion this year, compared with a 5.6 percent gain in 2011. Sales for November and December account for 20 percent to 40 percent of U.S. retailers' annual revenue, according to the Washington-based trade group. Last year's fourth quarter generated 59 percent of Cincinnati-based Macy's 2011 profit.

Lewis said he views even marginal growth as good news given the headwinds in the fourth quarter.

For the retail industry, "it's not going to be, 'Let's all break out the champagne. This is an incredible year,' " Lewis said. "It's: 'We had a good year, all things considered.' The consumer was the little train that could."

-- With assistance from Chris Burritt in Greensboro, North Carolina.

 

 

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