Amid Sales, Retailers See Margin Pressure

Economic and holiday sales data show no reticence on the part of the consumer to part ways with cash. Consumer confidence readings are high. Retailers reported brisk activity at the register over the past few weeks.

But according to eMarketer, a number of studies have pointed to what might be some troubling signs for retailers — namely, that discounting and other activities such as free shipping may eat into profits. The site noted that the margin-eating offerings were in part needed to get consumers to buy in the first place.

The end result: Fourth-quarter earnings for retailers should show net income declines of nearly 2 percent, as calculated by Retail Metrics. Walmart, an outsized force in the retail sector, may have impact, as discounting will also have a downward pull on metrics, the research firm’s president, Ken Perkins, told eMarketer. The expected net income decline will come despite sales growth projections of around 4 percent, measured through the holidays. Same-store sales will likely show more anemic growth of 1 percent for the period, said Perkins, who noted that physical store traffic and conversions were disappointing, which has “increasingly transferred the burden of sales generation to retailers’ eCommerce operations,” he said in an interview with eMarketer.

Separately, margin pressure was confirmed by retail consultancy Conlumino, which saw total holiday sales up 3.8 percent, yet within that tally, online buying was up 17 percent. Along with that, expectations for low-cost or no-cost shipping will hurt retail margins.


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