As we’ve been telling you, holiday spending can make or break a retailer. Will this Yuletide go out with a bang or a bust? CNBC’s Michelle Caruso-Cabrera spoke with Steve Liesman and Eric Beder of Brean, Murray & Co. on "Morning Call" to find out.
Both Visa and Mastercard are reporting growth for this year will be lower than it was last year. Visa slowed to 6.5% for 2006, down from 8.3% in 2005. Mastercard dropped to 6.6% this year, down from 8.7% in 2005.
CNBC Senior Economics Reporter Steve Liesman explained that these numbers are disappointing in context. They still show a surge of buying – but not enough for the entire Christmas season to beat last year’s growth rate. But Liesman added, “It’s not time to get out the lifeboats and abandon the economic ship.”
What’s the problem? Warmer-than-average temperatures likely depressed sales of winter apparel, while the consumer may have pulled back a bit because of the housing slowdown.
Liesman also said, “It's unclear why expectations were so high. The economy has moderated as the year has progressed, so somewhat lower growth rates for holiday spending seem entirely consistent.”
Eric Beder, retail analyst at Brean, Murray and Co., added his perspective on the lackluster retail sales. “It’s tough to buy [winter] apparel when it’s 55 degrees. I was at a store over the weekend," he says, "and they had to put on a fan – to cool down the store it was so hot!”
Beder noted other factors at play. "This was the year of the plasma TV," he says, "and I think it sucked out sales from a lot of other areas because they were so cheap. There was a tremendous amount of competition in terms of pricing, and it managed to kill the consumer electronics sector. And I think it also diverted spending from other places, too.”
According to Beder, retailers this year had a tremendous amount of discipline in regards to discounts, and that kept the bargain shopper out of stores. "Even in the final weekends, retailers were not discounting as heavily as they did last year," he says. "That will hurt initial sales but help margins on the sales they did make."
In the last few years, January has started to play an important role in holiday sales. “That’s because people look at gift cards as free money," Beder says. "For retailers who are smart and bring in new products, it can be a big season.”
Here's how some of the nation's largest retailers are trading at this hour.