Media Mantra: Unhappy Holidays Pessimism about holiday sales went right through Christmas this year.
Were consumers cheerful shoppers or Scrooges this Christmas season? The final sales data aren’t out yet, but the media have scared the dickens out of economy-watchers with the latter theory.
As reported by the Free Market Project in October and December, the media’s annual Christmas shopping gloom-fest started in August this year, well before back-to-school sales had ended. Phrases like “Consumers are pinched” and “Retailers are squeezed” were being uttered on news broadcasts before Labor Day.
By October, due to hurricane-related rising energy prices, predictions turned so pessimistic that one media outlet reported: “…for the first time since 1996, we may actually sell less this season, this holiday season, than we did the previous year. That’s unheard of.” The gloom was so pervasive that extremely solid results on the “Black Friday” after Thanksgiving, with some estimates showing as much as a 22-percent increase in sales over the same period in 2004, didn’t deter headlines like “Malls See Troubles in Sales Data.”
This pessimism continued right through Christmas day, even when the news began to come out that sales through December 24 were quite respectable. As Reuters reported on December 26: “U.S. consumers spent 8.7 percent more during the just ended holiday shopping period than in the comparable period a year ago, according to a report from an affiliate of MasterCard Inc., the Wall Street Journal reported in its online edition on Monday.”
Yet, the same day this data came out, CNN’s John Zarella on “Live Today” offered this: “And you know, retailers are saying that the pre-Christmas sales in general, nationwide, were a little bit sluggish, at least that at first blush appears to be the case, before the holiday. And many of them are really relying on what's going to happen now in the aftermath of Christmas.” CBS’ “The Early Show” was just as sullen that morning: “Retailers are hoping deep discounts could lure shoppers back into the stores after a slow shopping season.”
National Public Radio was even worse. Steve Inskeep on the “Morning Edition” December 26 invited retail consultant Kurt Barnard on to spread more gloom:
“[The Christmas shopping season] ended on a very lackluster note, and it is really not too surprising that this should be the case, because remember one thing: Consumers have a lot of things to worry about these days. First of all, it is true, the price of gasoline has come down, but it is still more than 40 percent above where it was a year ago at this time. So consumers really are worried about spending money very much so, and they are very cautious consumers these days.”
Forecasts to the Contrary
So, who’s right? The final sales numbers won’t be out until later in January. However, the range of predictions at this point goes anywhere from a low of a 3-percent gain forecast by the International Council of Shopping Centers reported by Bloomberg, to a high of an 8.7-percent gain according to MasterCard’s Spending Plus data service.
Maybe most importantly, the National Retail Federation – the retail trade organization that has been better at forecasting final sales data than anybody else in recent years, and forecast a 6-percent gain for this holiday season in late November – remains very optimistic. NRF spokesman Scott Krugman told CNN/Money on December 27 that the final numbers will be a “pleasant surprise for a lot of people.” “We are seeing some conflicting reports right now. But at the end of the day, this was the same pattern as last year,” he said. “Consumer spending has been up more than anticipated going into the holidays. This leads us to believe that we'll have a strong holiday season.”
If Internet sales are any indication, the season was anything but slow. Nielsen/NetRatings announced on December 29 that online Christmas sales increased by a whopping 30 percent this year. This was right in line with the expectations of the Shop.org/BizRate Research 2005 eHoliday Mood Study reported by the NRF (which owns Shop.org, an association of retailers online) before Thanksgiving:
“According to results released last month, all of the companies surveyed expect to see online sales increases from 2004. Some retailers are expecting big gains, with 57 percent of online retailers expecting holiday sales to increase by 30% or more compared to last year.”
Before Christmas, audiences couldn’t have foreseen those brisk sales because the media were delivering such sullen reports. Martin Crutsinger of the Associated Press logged this cheery report on December 22: “The holiday shopping season has turned in a mixed performance so far with the nation’s retailers expected to increase discounting in the final days before Christmas in the hopes of making up for slower-than-expected sales since Thanksgiving.”
As the big day approached, America’s media turned into one collective Ebenezer Scrooge. The New York Times published the following on Christmas Eve:
“The after-Christmas push, originally intended to lure holders of gift cards into stores, may turn into more of a salvage effort. In addition to lackluster sales gains, retailers endured a transit strike in New York City that damped business at crucial flagship stores, turning the post-holiday period into one of the most important in years.”
The same day, Reuters published an article entitled “Late Sales Rush Not So Merry”:
“Analysts said retailers cut prices more this year than they did last year in the hope of luring cost-conscious consumers, many of whom are grappling with steep gasoline prices and bracing for bigger winter heating bills.
“Although oil prices have retreated from record highs notched after Hurricane Katrina hit the Gulf of Mexico, they remain higher than they were a year earlier, putting pressure on household budgets.”
Even after the season ended, the economic downers kept coming. The New York Times’ Michael Barbaro reported the following on December 27:
“Many retailers hoping for a big finish to the holiday season instead had lighter-than-expected crowds over the long Christmas weekend, according to anecdotal reports, leaving stores to rely heavily on the next few days to pump up December sales.
“Explanations for the lackluster finish varied: an unusually warm winter hurt cold-weather clothing sales, greater gift card use delayed purchases and higher energy costs discouraged splurges.”
The Los Angeles Times was gloomier that day. In an article entitled “Retail Store Closures to Follow Sales,” the Times gave the impression that holiday sales were so poor this year that many storeowners will be forced out of business. The article began:
“Just as post-holiday sales are sure to follow Christmas, there's a long tradition of store closings following the big year-end sales as weak and struggling retailers call it quits.
“This year will be no different, with what looks to have been a less-than-stellar holiday retail season combining with a flurry of industry mergers to put even more stores than usual on the endangered list.”
Such concerns appeared to be weighing more on America’s media than on its citizens. On December 28, the Conference Board, an independent research organization, released data regarding December “consumer confidence.” Despite all the media’s fretting about rising energy costs impacting America’s holiday shopping, this gauge of consumer sentiment had a dramatic increase in December. CNN Money reported:
“The board's consumer confidence index rose to 103.6 for the month from a revised 98.3 in November. Economists had expected a rise to 102.5, according to Briefing.com.
“‘Consumer confidence continues to bounce back and is now at its highest level since Hurricane Katrina struck the Gulf Coast,’ Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement.
“‘The resiliency of the economy, recent declines in prices at the pump, and job growth have consumers feeling more confident at year-end than they felt at the start of 2005,’ Franco said.”
This boost in confidence flies in the face of all this media pessimism, and strongly supports the NRF’s view that final holiday sales will be a “pleasant surprise for a lot of people.” Free Market Project