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It’s going to be a Blue Christmas for Retailers

It’s going to be a Blue Christmas for Retailers


It’s going to be a Blue Christmas for Retailers

Blue Christmas for RetailersNew York – With the holiday shopping season just around the corner, Wal-Mart (NYSE:WMT) joined the chorus of companies that painted a gloomy picture of consumer spending for the rest of the year.

While Wal-Mart’s third quarter earnings and profit beat analyst’s expectations, the company trimmed their forecast for the holiday season, citing persistent unemployment, jitters over the Government’s health care plan, and tight budgets.

According to William S. Simon, CEO of Wal-Mart, the company’s customer base is seeing ‘their income going down while food costs are not.  Gas and energy prices, while they’re abating, I think they’re still eating up a big piece of the customer’s budget.’

Meanwhile, another discount retailer, Kohl’s (NYSE:KSS) also reported their third-quarter earnings on Thursday, but it missed analyst expectations altogether.  Kohl’s CEO, Kevin Mansell, stated, ‘let’s be clear: we’re disappointed in the third-quarter results.’  Just one day earlier, Macy’s (NYSE:M), which serves more of a middle- and higher-income market, looked far more comfortable.   The company beat consensus expectations and their share price shot up more than 10 percent this week.

Ken Perkins, president of the research firm Retail Metrics, noted that discount shoppers have been unable to increase their spending while consumers that are more affluent are able to expand their budgets.  ‘It does feel like a higher-end, lower-end kind of story,’ he said.  ‘The upper-income consumer is faring much better and will spend more.’

Given the poor outlook, Cowen and Company analyst Faye Landes, said she would not be eager to compete against Walmart.  ‘They’re going to price very aggressively and they’ll steal traffic in a low-traffic environment.’

On Thursday, Wal-Mart executives promoted low holiday prices, such as a 16-gigabyte iPad mini priced at $ 299, which will include a $ 100 Wal-Mart gift card.  Even with the discounting, Wal-Mart’s profits rose 2.8 percent in the third quarter, to $ 3.74 billion, or $ 1.14 per share.  Analysts were expecting earnings per share of $ 1.13.  However, same-store sales in the U.S., a key measure of retail health, slipped .3 percent.

Ultimately confidence will affect holiday sales, and if confidence is down consumer electronics and technology company’s such as Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOG), could be effected as well.

About Michael Reed

Michael Reed covers business and finance related news.

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