Major retailers, including Costco Wholesaler Corp., Gap Inc., and Nordstrom Inc., on Thursday reported better-than-expected revenue in December. That comes as a relief for stores, which can make up to 40 percent of their annual revenue in the last two months of the year.
Americans spent cautiously as the Northeast recovered from superstorm Sandy. Then they held back because of fears that the U.S. economy would fall off the “fiscal cliff,” triggering massive budget cuts and tax increases that would have meant less money in their pockets. But shoppers spent more freely in the final shopping days of the year.
Twenty retailers reported that revenue at stores open at least a year — an indicator of a store’s health — rose an average of 4.5 percent in December compared with the same month a year ago, according to the International Council of Shopping Centers. That’s on the high end of the expected range of 4 percent to 4.5 percent. Only a small group of stores that represent about 13 percent of the $2.4 trillion U.S. retail industry report monthly revenue, but the data offers a snapshot of consumer spending.
“I wouldn’t be doing cartwheels that it was a particularly great or strong holiday season, but it could have been worse given the headwinds,” said Ken Perkins, chief of RetailMetrics, a research firm. “The government and Mother Nature were not as cooperative as retailers would have liked. But it was definitely not as bad as feared.”
December’s results provide a brighter picture than reports last month that proclaimed that the holiday shopping season was shaping up to be the worst since 2008, when the nation was in a deep recession.
The season had multiple fits and starts, with healthy spending during certain periods followed by stretches of tepid sales. Overall, revenue for the combined months of November and December rose 3.1 percent, roughly on par with the 3 percent rise that the council had predicted.
Sales were weak at the start of November after superstorm Sandy and the distraction of the U.S. presidential campaign, followed by a surge during the four-day Thanksgiving weekend. Spending fell off after that until a rush before and after Christmas, when some stores began offering bigger discounts.
While the promotions may have drawn shoppers, they ate into stores’ profits.
For instance, Kohl’s Corp. said its December revenue at stores open at least a year rose 3.4 percent, beating Wall Street predictions. But the retailer said that the growth came from heavy discounts, and it cut its profit outlook for the current quarter and full year.
“Sales came late in the holiday shopping season and, as a result, were at deeper discounts than planned,” said Kevin Mansell, chief executive officer. “We are taking the necessary markdowns in the fourth quarter to manage our inventory as we transition into the spring season.”