“Christmas In July” May Kill Retail Jobs In The Fall

The Wall Street Journal reports that a number of retailers are running “Christmas In July” sales. They may help store chains that are low on money, but they probably just displace sales that would normally have taken place in October. That may be good for retail balance sheets, but only for a brief period.

Consumers are so badly shaken by unemployment, flat wages, and credit problems that they are not likely to spend a lot of money in malls now and then come back and spend a great deal more money in the fall.

The most important affect of summer sales is that they will almost certainly hurt the bump in employment that the economy gets in the fourth quarter in most years as retailers take on additional temporary workers. Stores are not full now, so current staff levels are probably adequate to handle  special sales, even successful ones. Retailers usually needed extra people for the holiday rush. The won’t need those people if a lot of their revenues have been pulled forward in the year due to summer bargains.

The promotions have two other negative by-products. One is that stores are discounting products now to bring in customers who might not shop otherwise in July. Many holiday shoppers in the fall, anxious to complete their buying before Christmas, are often willing to pay premiums for items, particularly those that are popular and hard to find after Thanksgiving. And, by moving consumer activity to the summer, retailers are almost certainly hurting their cash flows later in the year. The net of that is that annual sales will not change, only their pattern will.

A successful “Christmas in July” just means a worse holiday season for retailers.

Douglas A. McIntyre