Snow, consumer caution clip post-Christmas sales

By Reuters
Posted Dec. 27, 2010 at 10:35 a.m.

A major snowstorm on the U.S. East Coast kept many people away from malls just after Christmas, casting a pall on the final act of the holiday shopping season.

The weekend’s blizzard conditions, which shut down airports and halted traffic, may also signal an end to shoppers’ appetite in the next few months. Retail shares declined more than the wider stock market on Monday.
While total holiday sales are predicted to rise significantly from 2009 and represent the best spending in three years, the days after Christmas offer U.S. retailers a last opportunity to capture holiday spending.

Store chains offer additional discounts to lure extra purchases from shoppers when they come to return gift items or redeem gift cards.

“But for the weather, the momentum would have continued right through to this week,” said Joel Bines, managing director of AlixPartners’ global retail practice. He noted that more consumers were buying goods for themselves as well as gifts during the holiday season.

But shoppers who did venture out during the weekend said they were ready for a spending diet in early 2011 as they wait for a U.S. economic recovery to gain momentum and add jobs.

“I don’t think the economy is getting better. I think it is getting worse, actually,” said 16-year-old Loris Gabriel, who was still buying items for family members in Manhattan’s Harlem neighborhood on Sunday due to the steeper discounts.

Clyde Johnson, a 45 year-old train operator from Yonkers, N.Y., was shopping on Sunday at a J.C. Penney Co. store in Manhattan, but said he would cut back as soon as the holidays end.

“If I can’t afford something or I feel it is too much and I really want it, I will save until I have the money,” he said.

The Standard & Poor’s Retail Index fell 0.6 percent on Monday morning, while the broader S&P 500 was down 0.1 percent. Earlier in December, retail shares hit a 3 1/2-year high and the index has risen about 24 percent this year.

Shares of department store chains Macy’s Inc. and  Penney’s were down 1.1 percent, while Target Corp. and Inc. were down 0.6 percent. Nordstrom Inc. shares fell 2.2 percent.

A pullback by shoppers now could dent the U.S. economy’s recovery, since consumer spending accounts for 70 percent of gross domestic product.

Mall operator Taubman Centers Inc. said a number of shopping centers it operates saw light traffic on Sunday because of the storm, which dumped more than a foot of snow in New York and other major East Coast cities, and as of Monday morning was heading to New England.

Kizzy Pruitt, 31, was shopping at a Wal-Mart in Hudson, Massachusetts, on Christmas Eve on Friday. She has spent less this year, even though she has been able to hang on to her job as a truck dispatcher.

“I’ll be all done after this,” Pruitt said of her shopping plans for the near future.

Retail spending in November beat expectations, leading industry groups and analysts to raise forecasts for the holiday season. The National Retail Federation sees holiday sales up 3.3 percent from a year ago, a major jump from the 0.4 percent increase last year, and the 3.9 percent fall in 2008 due to the financial markets’ crisis.

Analysts say the uptick in spending signals pent up demand after two years of scrimping on Christmas purchases, as well as shopping habits gradually returning to normal.

But shoppers will balk at the higher retail prices for clothing that are likely to come in 2011 because of higher cotton prices, which have nearly doubled in 2010.

“There’s a willingness to spend,” said Bines. “But I don’t yet think the consumer is ready for higher prices.”

Wall Street analysts are expecting December comparable sales at 28 major U.S. retailers to be up 3.6 percent, led by discounters and department stores.

Online sales have also risen this year. Data firm comScore said on Wednesday that online spending was up 12 percent for the season at that point. said on Monday that sales of e-books had hit a company record on Christmas Day.

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