Winnipeg Free Press - PRINT EDITION

Stores feel holiday sting

More customers shopped online in Christmas season

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NEW YORK -- The financial strains and shifting shopping habits of North Americans have led to uneven fortunes for retailers.

Traditional consumer companies such as Wal-Mart Stores Inc. and Mattel have continued to struggle as North Americans spend more cautiously in the uncertain economy. Meanwhile, Amazon.com has flourished as shoppers increasingly buy online rather than head to stores.

The trend was evident during the pivotal holiday shopping season, a time roughly from November through December when many retailers can make up to 40 per cent of their annual revenue. Overall, government figures show spending during October through December rose at the fastest clip in three years.

But exactly where and how North Americans spent their money during the final months of the year shifted. Fewer people were in and out of stores during the holiday season, but more were shopping online.

Online shopping rose 10 per cent to $46.5 billion in November and December, according to research firm Comscore. Meanwhile, sales at stores rose just 2.7 per cent to $265.9 billion, according to ShopperTrak, which tracks data at 40,000 stores in the U.S. And the number of customers in stores dropped 14.6 per cent.

"Consumer behaviour evolved quickly, as retail foot traffic fell while online purchases grew," Mattel CEO Bryan Stockton said in a call with investors Friday.

On Friday, Mattel reported results for the fourth quarter, which included the holiday shopping season, that missed analysts' estimates and the company's own expectations. The world's largest toy maker said the disappointing results were due to weak sales of Barbie and other toys. "From my perspective, the 2013 holiday period has to be one of the most transformative I have seen," Stockton said.

Wal-Mart also expects disappointing results during the period that includes the holiday shopping season. On Friday, the world's largest retailer said its fiscal fourth-quarter and full-year adjusted earnings from continuing operations may come in at or slightly below the low end of its prior forecasts.

Chief financial officer Charles Holley in part blamed a bigger-than-expected impact from the U.S. government's reduction in Supplemental Nutrition Assistance Program benefits (food stamps) that took effect Nov. 1. That pressured Wal-Mart's primarily low-income consumers.

Wal-Mart is among 33 major retailers that have lowered their outlooks for the fourth quarter and beyond, mostly because of the disappointing holiday shopping season, according to Ken Perkins, president of RetailMetrics LLC, a research firm.

"A highly competitive environment is going to be staring (retailers) in the face throughout the course of 2014," Perkins said. "The pressure and competition are not going to abate at all."

Wal-Mart and Mattel faced stock declines Friday on their disappointing news. Wal-Mmart shares fell in the morning before ending flat and Mattel shares fell 12 per cent.

Amazon said late Thursday its profit and revenue grew in the latest quarter. Still, the world's largest online retailer said its results fell below Wall Street expectations, sending its shares down 11 per cent Friday.

But Amazon faces very different problems than its bricks-and-mortar competitors. Amazon's results were hurt because its costs are rising along with its meteoric revenue growth.

As it struggles to balance its operating costs with revenue growth, the company said it is considering raising the fee on its Prime membership, which offers free two-day delivery on most items.

The service is so popular Amazon had to suspend accepting Prime members during the holidays because it couldn't process them fast enough. In addition, carriers had trouble delivering orders on time due to unforeseen demand, so Amazon had to issue some gift certificates and rebates.

Despite Amazon's results falling short of expectations, Wedbush analyst Michael Pachter said 2013 was Amazon's best holiday ever.

"Amazon set records in several areas, including a record number of Amazon Prime items shipped worldwide on Amazon's peak shipping day," he said.

-- The Associated Press

Republished from the Winnipeg Free Press print edition February 1, 2014 B9

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