published Friday, November 25th, 2011

Holiday sales and the economy

Holiday sales are vital to the nation's retailers, and this year is no different. The U.S. economy, despite recent indications that times are improving, remains vulnerable to gyrations in a stock market that is driven as much by the euro crisis and foreign sovereign debt problems as by Washington's partisan troubles. Given that, the nation's retailers will watch sales figures with especial concern between now and the new year.

Their concern is understandable. Many retailers count on the last few weeks of the year to generate a goodly share of their yearly profit. Any sign or indication that holiday sales will be less than robust during that period can bring on an extreme case of the jitters. Thus, merchants are working overtime to attract customers this year. That's why Santa, seasonal decorations and holiday merchandise displays appeared around Halloween.

That's sound business practice when unemployment remains far above historical averages and consumers are cautious about spending -- even for the holidays. Retailers have reason to be cautious about the pace of holiday sales.

They'll get their first indication of what the year might bring late tonight. That's when sales figures will begin to flow to analysts following the so-called Black Friday. The day after Thanksgiving got that name because it marks the beginning of the period in which lots of businesses go from being in the red (carrying a loss on their books) to being in the black (turning a profit). It's been that way for years.

Times are changing, though. Today will be very busy day for retailers, but there are other big shopping days in the coming weeks. In recent years, for example, sales on the Saturday and Sunday before Christmas Day were the heaviest of the season.

The same scenario applies to the so called Cyber Monday next week. Web site sales that day traditionally are high, and often used as a barometer for the season. In the last couple of years, though, the Web has generated high volume on other days, too. Whatever occurs today and Monday, retailers still will worry.

Consumer spending still drives the U.S. economy. Sales in some segments of the market have improved in the last few months, but others have been static or reported slight declines. That's to be expected given the ups-and-downs of the economy. Even so, consumers have continued to spend, a trend that should provide some relief to many retailers.

Indeed, many of those who track retail sales predict modest increases this year. Retailers and economy watchers would prefer greater growth, of course, but any increase is preferable to the alternative.

Still, this year, more than most, retailers' profits depend on the willingness of Americans to spend. What consumers will do when there is considerable concern about family finances and long-term security is, for the moment, an unanswerable question. Until the marketplace provides a response, the retail community's worry about sales and profits will remain valid.

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