Is Holiday Season Set to Lose Momentum?

Nothing concrete can be said about the outcome of the holiday season at this present juncture. It is a wait-and-watch game to find out if retailers will be rewarded, or if they fall weak against the negative consumer sentiment largely due to the looming “Fiscal Cliff”. However, the latest data unveiled by ShopperTrak hints at a slower growth forecast than previously expected.

The Chicago-based retail analysis firm now projects holiday sales for November and December period to rise 2.5%, down from 3.3% increase previously forecasted in September 2012. The current estimate also fares unfavorably with 3.7% growth achieved in the prior-year holiday season.

The retail foot traffic data provider, ShopperTrak trimmed its holiday sales forecasts blaming the huge discounts offered by retailers to entice consumers, and the adverse impact of Hurricane Sandy that derailed November comparable-store sales.

However, on the positive front, ShopperTrak reiterated that foot traffic in this holiday season will rise 2.8% compared with 2011, which experienced a 2.2% decline in foot traffic from 2010. If the estimate is true, this will be the first increase in foot traffic during the holiday season since 2008, when the economy slumped to recession.

ShopperTrak also revealed that foot traffic jumped 15.1% and retail sales surged 16.4% for the week ending December 15, when compared with the previous week. However, comparing with the prior-year period, foot traffic and retail sales dropped 4.4% and 4.3%, respectively, for the week ending December 15. ShopperTrak also suggested that the week ending on December 22 may witness the highest sales volume in 2012.

Thus, we need to wait to find out how the total December sales turn up; i.e., whether it fares better than November or succumb to the current economic upheaval. According to the data released by the U.S. Department of Commerce, total retail and food services sales jumped 0.3% in November, rebounding from a decline of an equivalent percentage in October. (Also Read: Will December Mirror November Sales?)

Analysts are anticipating sluggish economic growth as companies seem reluctant to make any prudent investments until a negotiation regarding the Fiscal Cliff issue is reached between the Republicans and Democrats before the onset of 2013. The austerity measures and fear of impending tax hike are creating some panic among consumers. In recent days, the Street’s mood doesn’t seem much optimistic as investors remain apprehensive about the failure on the part of policy makers to reach a consensus.

The Dow Jones Industrial Average (DJI) shed 0.7% to close at 13,251.97 on December 19. The S&P 500 dropped 0.8% to end the day at 1,435.81, whereas the tech-laden Nasdaq Composite Index dropped 0.3% to close at 3,044.36.

Sensing the pulse, retailers such as Target Corporation ( TGT - Analyst Report ) , Macy’s Inc. ( M - Analyst Report ) , Kohl’s Corporation ( KSS - Analyst Report ) , Nordstrom Inc. ( JWN - Analyst Report ) , Costco Wholesale Corporation ( COST - Analyst Report ) , Limited Brands Inc. ( LTD - Analyst Report ) and others will be actively making efforts to win the hearts of bargain hunters. Despite the lingering economic concerns, we hope the arrival of Christmas will guide demand higher and ease consumers’ apprehension.