MANY US store chains had to resort to deep discounts to lure shoppers over the holiday selling season, cutting into profits even as overall December sales came in slightly above expectations.
The news showed retailers are still struggling to convince post-recession US shoppers to buy at full price, an ominous sign at the start of 2012.
“In recent years retailers have trained consumers to respond only to discounted pricing,” said Lawrence Creatura, a portfolio manager at Federated Clover Investment Advisors.
“The risk is that if the retailer has to take those discounts further than planned, it can impact margins,” he said.
Retailers such as JC Penney, Gap, Limited Brands, American Eagle Outfitters and Childrens Place all called the holiday season highly promotional.
If shoppers turned out, they did so on condition of getting good deals, something experts said would continue into 2012.
Penney cut its quarterly profit forecast, citing “higher markdown activity”, and its shares fell. Kohl’s also cut its holiday-quarter profit outlook after a disappointing December and a disastrous sales decline in November.
Macy’s, which expanded its late-night hours to more stores in the final days before Christmas and carried more exclusive goods, reported a better-than-expected 6.2 per cent rise in December same- store sales and raised its profit and sales outlook for the current quarter.
Most retail stocks fell yesterday. The Standard Poor’s Retail Index was down 0.6 per cent at midday, while the broader Standard Poor’s 500 Index slipped 0.2 per cent. Macy’s, TJX and Ross Stores were among the few retail gainers.
Target’s sales did rise, but they missed expectations as the discounter faced a resurgent Wal-Mart. Target lowered its quarterly profit forecast.
Wal-Mart’s decision to bring back a lay-away programme has been a hit with shoppers and has challenged the companys rivals.
Gap was one of the biggest losers, with overall same-store sales down 4 percent.
Costco Wholesale’s 7 per cent same-store sales jump just missed the 7.6 per cent increase Wall Street was eyeing. – (Reuters)
