Expecting the unexpected
It appears consumers came through in the end and saved Christmas this year, or at least that is the emerging school of thought heading into Thursday, with the release of December results that will reveal whether heightened expectations are justified.
“Throughout the past year, consumers have shopped closer and closer to need or event, and Christmas season 2009 was no different,” according to Deutsche Bank analyst Bill Dreher. “The weaker-than-expected November sales now appear to have been a false negative on the holiday season as consumers waited until December and even the final week before Christmas to purchase gifts.”
The implication for Target is that the company’s negative and non-specific guidance for December same-store sales could prove conservative, and profitability will benefit, as there was less discounting overall this past holiday season compared to a year earlier. Recall that results were weak for retailers across the board in November, and that seemed to reinforce early season holiday forecasts that called for sales to be flat to down in the low-single digits. Target reported a worse-than-expected 1.5% decline in November 2009 same-store sales on top of a 10.4% decline the prior year. It also indicated that December comps would be in line with November’s, but noted that inventories were in good shape. A monster snowstorm, which hit the Northeast the Saturday before Christmas, added to concerns that holiday sales would be negatively affected, but that proved not to be the case, and then MasterCard Advisors came out with its SpendingPulse results, which showed holiday sales increased 3.6%.
“Overall this year, we have seen increasing stability in spending, as opposed to the free-fall of 2008,” said Michael McNamara, VP research and analysis for SpendingPulse. “This is especially significant considering that prices have been holding up this season, without the broad emergency discounting that consumers benefited from during the 2008 holiday season.”