No Further Holiday Price Discounts

The fun part of the holiday season that involves getting things on sale may be ending. Retailers have managed their inventories better than they did last year. Large stores will not be stuck with huge numbers of shelves of unsold gifts. That means that price cuts have already been made and that last-minute markdowns are not coming.

“The difference between this year and last year was planning,” said Scott Krugman, a spokesman at the National Retail Federation, the world’s largest retail trade group, which hasn’t changed its forecast for a 1 percent decline in holiday sales. “Retailers had time to plan whereas last year they didn’t,” the AP reports.

The ability to hold the line on pricing leaves one issue unexamined. How well will margins hold up even if what the consumer pays stays as it is between now and Christmas? Some chains may have already gone too far in moving down prices to get in early shoppers.

Best Buy (NYSE:BBY) announced earlier this week that its margins during the current quarter would be worse than expected, but revenue would be fine. It began to offer customers extremely low prices over a month ago to get and keep market share that might have gone to Amazon (NASDAQ:AMZN) or Wal-Mart (NYSE:WMT).

Retailers may not be cutting prices between now and the end of the year, but they may have already cut them too much.

Douglas A. McIntyre