Tags: Mixed | Signals | Holiday | Sales

Mixed Signals on Holiday Sales

Tuesday, 06 December 2005 12:00 AM

It was only months ago that UK Chancellor of the Exchequer Gordon Brown predicted that 2006 economic growth in the UK would be a robust 3.5%.

But now Brown is changing his tune, cutting his estimate in half with a revamped growth estimate of 1.75%.

The latter figure is much closer to a broad array of analyst predictions on UK economic growth. Brown based his revisions on higher gas and energy prices and a slow housing market going into 2006.

According to CBS Marketwatch, Brown also raised his net borrowing targets for 2005 and 2006 as a result of his revised economic projections.

"Brown, expected by many to become the country's next prime minister, also increased the surcharge on profit for oil companies in the North Sea, moving the surcharge to 20% from 10%," says Marketwatch.

Despite news that Target Corp. is estimating December sales to be up 5% from the same period last year and Wal-Mart has reported December growth at 4%, Bloomberg is taking a dour view of holiday sales this year.

The newswire reported Monday that U.S. retailers may slash prices this month to compensate for slow sales in November.

Bloomberg reports that "Federated Department Stores Inc., Target Corp. and Kohl's Corp. may lower prices, said Patricia Edwards, who helps manage $6.4 billion at Wentworth, Hauser and Violich."

"Almost half of the retailers reported results below analysts' forecasts last month, the worst performance since July, said Prudential Equity Group analyst Stacy Pak in a Dec. 1 report."

Burt Flickinger, managing director of Strategic Resource Group, concurs with the mainstream media's pessimism.

"It's going to be a great year for consumers in terms of saving on their holiday shopping, but it's going to be a very mixed year for retailers and the bottom line," he tells Bloomberg.

The news agency bases its opinion on November retail economic numbers, but it does not mention the decidedly rosier numbers for December. The article says retailers were forced to heavily cut prices just to keep customers walking in the door.

"Kohl's Web site featured a sale on Dec. 2 and Dec. 3 with up to 60% off sweaters and 60% off leather and suede jackets," says Bloomberg. "J.C. Penney Co., the third-largest U.S. department store chain, advertised 30% off of regular prices and 10% off of sale prices from Dec. 2 to Dec. 5 in what it called a 'huge holiday sale.' "

Internet purchases and gift card growth could be confusing analysts.

Bloomberg reports that 20% of all holiday sales may be pushed back into January, when recipients flock to stores to use their gift cards.

The National Retail Federation is decidedly more bullish than Bloomberg. The NRF is sticking to its original forecast of 6% growth across the retail industry this holiday season.

And significant consumer spending feeds that sentiment. According to David Joy, a fund manager at Ameriprise Financial Inc.'s RiverSource Investments in Minneapolis: "Right now the consumer is expressing a fairly aggressive willingness to continue to consume."

"They're determined to have a good holiday season."


Santa is a busy guy.

Not only is he preparing to deliver all those toys to children around the world - he may also be helping to prop up Wall Street, as well.

Data from the Advanced Financial Network (ADVFN) Web site shows that the so-called "Santa Effect" really does give the stock market a holiday boost.

The Dow Jones Industrial Average performs best in December, according to research from the site. 

The so-called "Santa Effect" has meant that over the last 20 Christmas seasons, 15 Decembers have seen the Dow Jones Industrial Average up on the month, while a mere five have seen it go down.

The index has also shown a striking 2.29% improvement in December. That's the biggest average swing up or down of any month over the whole period of the study. December 1991 was particularly jolly, recording a 9.47% return.

In contrast, September is the worst-performing month, with the Dow down an astonishing 12 times and losing an average of 1.36% over the study.

"Christmas certainly is the season to be jolly where the stock market is concerned. December is a critical sales month for many, and industries often account for more than half of their business in the few selling days before the magical 25th," says Clem Chambers, CEO of ADVFN.

"This, perhaps coupled with the general bonhomie, seems to account for the great returns of the month. Let's hope history repeats itself in 2005."


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It was only months ago that UK Chancellor of the Exchequer Gordon Brown predicted that 2006 economic growth in the UK would be a robust 3.5%. But now Brown is changing his tune, cutting his estimate in half with a revamped growth estimate of 1.75%. The latter figure...
Tuesday, 06 December 2005 12:00 AM
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