Monday, December 24, 2007

But Will It Be a Good Christmas for Retailers?

From the WSJ:

Some big stores, among them Macy's Inc. and Sears Holdings Corp.'s Kmart, stayed open around the clock to accommodate shoppers. And mega markdowns enticed many customers. Among them was Andy Gress, a teacher from Knoxville, Iowa, who braved a coming snowstorm to prowl the Jordan Creek Town Center west of Des Moines on Saturday. Having done much of his shopping weeks ago, he was back looking for stocking stuffers.

Merchants throughout the Iowa mall were advertising substantial discounts: "Everything 50% off," the sign in the New York & Co. window said. Across the hall, rival apparel retailer C.J. Banks, part of Christopher & Banks Corp., promised "Save up to 70% off."

"Sales were coming at the expense of profit margins," said A.T. Kearney's Mr. Mityas, referring to the spate of heavy promotions that characterized much of this holiday's marketing.

At some point, cost-cutting eats into profits in a big way. I don't know if we are at that point with these numbers, but I think it's very possible we're going to see some nasty earnings surprises from some retailers in the Spring.