Caution: Retail 'Tipping Point' May Be Ahead - Holiday Central

Runway Angels
The superbowl of fashion shows, models walk down the runway at the 2009 Victoria's Secret Fashion Show.
The Richest Members of the US Congress
Recently, the Center for Responsive Politics found that there are 237 millionaires in the US Congress.
10 Tips to Get Out of Debt
Renowned financial author Gail Vaz-Oxlade takes a tough-love approach to helping couples in a financial crisis to face reality.

CNBC ON DIGG

ABOUT THIS BLOG

It's a make-it or break it time for retailers. The holiday selling season is always a critical time for retailers, but this year this may be even more true. With several retailers already falling victim to a drop in consumer spending, and filing for bankruptcy, retailers will be navigating through some tricky waters. Consumers are strapped for cash due to high energy and food prices, and unemployment is rising. The recent credit crunch has made it more challenging for retailers and consumers to borrow.

This blog will look at the winners and losers in the retail space. Who has the right strategy to capture consumer dollars? It also will look for trends in consumer spending and how that will impact the economy.

Stay up to date with the Holiday Central

We’ll send the latest "Holiday Central" posts directly to you

Subscribe to this RSS feed

How to use RSS?

Text Size

Dec.27

5:19 PM ET

Thursday, 27 Dec 2007

Caution: Retail 'Tipping Point' May Be Ahead

Posted By:Margaret Brennan

Sectors:Retail

Companies:Costco Wholesale Corporation | Target Corporation

Kathy Willens / AP

Pick a survey, any survey.

The range of growth can be whatever you'd prefer when it comes to picking just how successful this holiday was for stores:

- Up 2.4% (3.6% if you add in gas), according to MasterCard [MA Loading... () ];

- Below 2.5%, according to the International Council of Shopping Centers;

- And even up almost 7% versus last year, according to Craig Johnson of Consumer Growth Partners (the rosiest that I've seen so far).

I've gotten a fair amount of angry e-mails from business news watchers, saying that growth is growth and that the financial press -- including myself -- hasn't been rosy enough in describing holiday sales as good.

(Clearly, they don't receive the notes and emails that I get from retail stock investors and analysts, talking about the confusing sales results this holiday!)

But the point is not whether stores made money: Clearly, even with a small sales gain and promotional pricing of products, stores will make profits. Consumers are indeed spending more than they have in years past.

No, the real question is whether we've reached a tipping point in maxing out that growth rate or overtapping consumer budgets.

(Not that spending beyond budget ever stopped consumers. I know it doesn't stop me! And it certainly didn't stop millions of Americans from taking on mortgages beyond their sensible budget range. But I digress...)

As with every story on Wall Street, investors are obsessed with growth. Retail stock investors have been e-mailing me like mad, characterizing the holiday picture as frankly "confusing."

They are all waiting on pins and needles to see whether Target's [TGT Loading... () ] flat December sales guidance will be the norm, or whether more stores will have good news like Costco [COST Loading... () ] shared today -- the discounter indicated that inventories are under control and that they won't need to take heavy markdowns. They'll have to wait until Jan. 10 to get answers!

On a completely different note: Markdowns aren't good for stores but they are for consumers -- including me! J. Crew [JCG Loading... () ], Foot Locker [FL Loading... () ] , Express, Nordstrom [JWN Loading... () ] were just some of the stores that I wandered into, to check prices. $100 boots marked down to $15 at J.Crew! Are you still shopping this season? Why not?