Negativity trailed the fateful Black Friday shopping weekend, but now that the 2009 battle for consumer bucks is finished, it seems that holiday retail sales did increase a bit year over year. While retailers may be able to enjoy this small victory, they could still face a long, grim war ahead.
A Wall Street Journal report on MasterCard's (NYSE: MA ) SpendingPulse data showed that retail sales increased 3.6% (excluding cars and gasoline) year over year, as procrastinating shoppers started shelling out at the 11th hour. However, this year brought an extra shopping day between Christmas and Thanksgiving. Without it, sales would have nudged up just 1%. That meager growth gets even less comforting when compared to 2008's holiday disaster, in which retail sales dropped 3.4% from the prior year.
Offering great deals and promotions on some items to lure shoppers, and holding prices steady on most others, apparently worked well for retailers. This was a daring move, though, since earlier surveys showed many shoppers sought deep, deep discounts to convince them to spend.
Even if shoppers did finally succumb to a Santa-esque spirit after a tough year, investors shouldn't forget that overall, consumers could be evolving into more frugal creatures. Given the still-high rates of unemployment and indebtedness nationwide, they may have no choice. That means retailers will likely continue to face hardships, since many of them overexpanded during bubbly economic times. Online retailers such as Amazon.com (Nasdaq: AMZN ) represent an increasingly serious threat to weaker bricks-and-mortar players, and juggernaut Wal-Mart Stores (NYSE: WMT ) has upped its online presence as well.
Customer traffic has fallen at places that once seemed immune. Starbucks (Nasdaq: SBUX ) provides a good example of an "affordable luxury" that suddenly seemed far more luxurious than affordable. Investors must carefully consider how high-end retailers such as Nordstrom (NYSE: JWN ) and Williams Sonoma will deal with shoppers' increasing thrift. Stocks in discounters like Wal-Mart, Costco (Nasdaq: COST ) , and Target (NYSE: TGT ) suddenly seem like far more secure ways to play the recovery.
Even if the sector managed to eke out a win during what is usually the year's most frenzied shopping season, retail's risks are far from over. If anything, the challenge has probably just begun.
What do you think? Will consumers revert to their spendthrift ways in 2010, or pinch their pennies even more tightly? Sound off in the comments box below.
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