U.S. Retailers Used Deep Discounts to Lure Xmas Shoppers

U.S. retailers used deep discounts to help fuel a last-minute surge in holiday shopping since December sales were slightly below normal levels, according to a report by the National Retail Federation (NRF).

Although final holiday numbers will not be reported until tomorrow (Thursday), the December NRF Executive Opinion Survey shows slightly above normal readings in key industry operation measurements.

The Retail Sector Performance Index (RSPI) for December posted an above normal reading of 51.9, 2.7 points lower than the prior month and 4.7 points lower than December 2003. The RSPI measures retail executives' evaluations of monthly sales, customer traffic, the average transaction per customer, employment, inventories and a six-month-ahead sales outlook expectation. The RSPI is based on a scale of 0.0-100.0 with 50.0 equaling normal.

The December Pricing Index continued to fall with a reading of 22.9, a decrease of 7.1 points from the prior month though 1.0 point higher than December 2003. With pricing power at its lowest reading since February (21.9), retailers were clearly focusing on discounting excess inventory in December.

. "Retailers clearly relied on heavier promotions to help boost holiday sales with a late spending surge," said NRF President and CEO Tracy Mullin.

The Current Demand Index, which includes sales, average transaction and customer traffic, posted a below average reading (47.2) for the first time since September. The December Current Demand Index was 7.8 points lower than the previous month and 10.1 points lower than a year ago.

The December Operations Index, which includes employment and inventories, posted an above-normal 56.3, up 2.5 points from November and up 6.3 points year-over-year.

Retailers continued to look past the holiday season with some caution as the demand outlook (a six-month outlook for sales) posted a slightly above normal reading of 52.1, 2.9 points lower than the previous month and 10.4 points lower than the prior year.

NRF continues to project an increase of 4.5 percent in holiday sales over last year, bringing estimated revenues of $219.9 billion this holiday season. The NRF will be releasing final holiday numbers tomorrow in conjunction with the release of the Department of Commerce retail sales report.