After-Christmas Sales Could Badly Damage Retailers

By Douglas A. McIntyre Published Dec 26, 6:41AM EST

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Whatever many retailers made in profits over the holiday season might wash away with after-Christmas sales. USA Today has made the point that discounts seem greater than usual. The newspaper’s evidence appears strong.

Several retailers should hold profits, even with late holiday discounts. Amazon.com Inc. (NASDAQ: AMZN) should post huge revenue growth and net income, if the e-commerce firm has not undermined margins with free-shipping costs. Higher margin retailers that cater to the middle class, like Macy’s Inc. (NYSE: M), should have built good enough margins to keep them relatively high as they bring in people who shop between Christmas and the end of the year.

Much less certain are the fates of retailers who needed to make money this year. The Sears and Kmart units of Sears Holdings Corp. (NASDAQ: SHLD) sit at the top of that list, along with J.C. Penney Co. Inc. (NYSE: JCP). Each faces the vexing problem of how to drag in customers and liquidate inventory not sold in November and December. Investors have not shown optimism. J.C. Penney stock sold off from more than $10 nearly a month ago to as low as $8 recently. Shares of Sears Holdings have dropped more than 25% during the past month.

The two battered retailers can either show that they posted improved sales over month, as well as can boast balance sheets without inventory hangovers, or they can hope to show goods earnings, based to some extent on discipline over prices. Neither can do both. Their record with attracting store traffic has historically been too poor to allow them to avoid sharp prices cuts as a means to draw shoppers.

J.C. Penney and Sears needed a strong holiday season nationwide to help lift their sales. And each needs post-Christmas sales, and prices, to be strong as well. The given evidence shows neither happened. The weakest retailer probably will not recover due to better-than-expected holiday spending.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.