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Storm Not the Reason for Slipping Sales

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Put it on the shoulders of unemployment and uselss retail tactics.

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A blizzard blanketing the eastern United States makes for a good excuse for contributing to weak holiday sales. It doesn't, however, accurately explain the fact that consumers are celebrating a less materialistic Christmas this year.

I have no doubt that the winter storm this past weekend put a damper on last-minute holiday shopping. Any major weather event can wreak temporary havoc on sales. However, a three-day snowfest won't justify an entire two months of sluggish holiday shopping.

Threatening consumers by publicly announcing lean inventory levels this year, retailers thought they could persuade shoppers to buy early and pay full-price by causing panic that merchandise would be scare. The tactic didn't work.

As of December 16, however, the average shopper had completed just 46.7% of their holiday shopping, according to the National Retail Federation. Even worse, a whopping 19% of consumers had not even begun their Christmas shopping. (See Finding the Simpler Pleasures This Season.)

This means one of two things; either these consumers aren't planning to purchase gifts at all or they're holding out for massive after-Christmas deals. (Notice neither of those included being snowed in).

And it makes sense. With 10% of the economy unemployed, a lot of families won't be exchanging gifts this year. Those that do have jobs have been dramatically cutting back because of a lack of available credit and fear that their job may be in jeopardy.

According to tracking records by Retail Eye Partners, consumers are leaving the mall with only a few small bags from numerous stores rather than large bags from one or two stores. Translation: Retailers who implement higher mark-ups and have the potential for massive discounts after Christmas -- like the 70% off deals to be had at Saks (SKS) last year -- are likely only selling their promotional items now.

My prediction is that retailers like Walmart (WMT), Big Lots (BIG), Aeropostale (ARO), and T.J. Maxx (TJX) will be better holiday performers because these companies are known for offering rock-bottom pricing year round. Shoppers are less likely to worry about missing out on dramatically big deals if they buy now.

The fact remains that consumers have changed. And as Heinz (HNZ) Chairman and CEO William Johnson stated in a recent interview with Reuters, "To say that consumers will return to historic norms is disingenuous."

Consumers have been conditioned to wait, wait, and wait some more to get the best bargains possible. The "use credit because I gotta have it now" mentality has vanished. And the fact that something might be sold out doesn't faze them anymore.

Winter storm or not, holiday sales were bound to be weak this holiday season. The storm only affected parts of the east coast, meaning the rest of the US could have been out shopping. Those stuck in the storm who wanted to shop could have easily logged online. Thus, blaming a storm for hampering holiday sales is complete nonsense.
No positions in stocks mentioned.
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