Price Cuts Coax Holiday Dollars from US Consumers

09 January 2006

Heavy discounts coaxed America's holiday shoppers to the malls in late December, nudging overall sales slightly ahead of forecasts. Topping the charts were teenage fashion stores.

Around 64% of retail companies bettered their sales forecasts for December, although the lemming-like rush to discount will have impacted on margins.

Ahead of the herd was youth fashion chain Aeropostale, recording an 11.4% surge in same-store sales after slashing its prices. Rival American Eagle Outfitters also posted a 9.8% rise in sales - tripling analysts' consensus forecast of 3.3%.

Larger department stores like Nordstrom and Federated Department Stores, which owns Macys and Bloomingdales, also recovered from sluggish November sales. But discount retailers such as Target missed forecasts, pointing to the erosion of consumer spending power by higher fuel costs.

Nor was the globe's largest retailer spared: Wal-Mart recorded a weaker than expected 2.2% sales rise, triggering a warning that its fourth quarter profit forecast would be at the lower end of expectations.

  • However, news from the US service sector was more upbeat with the Institute for Supply Management's services index rising 1.3 points from November's 58.5 to 59.8 in December.

    Comments ISM survey committee chief Ralph G Kauffman: "The overall indication in December is continued economic growth in the non-manufacturing sector with a cautiously optimistic outlook as we enter 2006."

    Data sourced from BBC Online; additional content by WARC staff