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Deep Discounts Damage Christmas Sales

Andrew Marder
December 27, 2013

Happy holidays! The figures are in and we are looking like winners all around. Retail sales were up 2.3% this holiday season, compared to a measly 0.7% increase last year. Open up the champagne and get ready for 2014 -- what's that? Discounting? Promotions? Oh, I'm sure these guys don't know anything about any "discounting" -- these sales were all at full-price, right, guys? Hey, where'd everybody go?

How low did they go?
According to analysts, 2013 turned out to be the most promotional holiday season since 2008. Apparently the end of the year didn't make stagnating wages, government ineptitude, and taxes disappear. As a result, we went out to spend more only if we were going to get more.

The increase in traffic could end up paying off for businesses, and any company that managed to stay above the fray may have benefited from the extra foot traffic driven by everyone else's sales. This quarter, however, is likely to look rough for many brands.

Companies with already weakened brands are going to be the hardest hit, as they are the ones that will need the deepest cuts to get traffic. Two businesses that spring to mind are J.C. Penney (NYSE: JCP) and lululemon athletica (NASDAQ: LULU).

Can weak brands bounce back?
J.C. Penney has been on the ropes all year, that's not news. The added trouble it may see is from the