Retail Detail. Christmas in July

July 31, 2008 • Shopping


Get shopping now. Seriously, do your holiday shopping now. Why? Well the news about the US economy just keeps getting worse and here is another zinger…brace yourself for price increases up to 15% on holiday goods!

According to the Boston Globe, soaring energy prices are again to blame for price hikes in staples like tree ornaments and toys to luxury gifts like European handbags and clothing.

While most consumers are just starting to think about back-to-school shopping, retailers are already preparing for the make or brake holiday season. Many stores are still deciding on their holiday prices. While receding oil prices in recent weeks could provide a bit of relief don’t expect much. Buying that designer handbag now might help you save a little — but for some items, it’s already too late.

Carl Steidtmann, chief economist at Deloitte Research, says that price inflation will be yet "another factor that undermines consumer purchasing power and will hurt spending even more. This will be a very difficult holiday season," he said.

European luxury goods are getting even pricier as the dollar erodes against the euro. New York-based luxury consultant Robert Burke estimates that the price tag on European status handbags, shoes and clothing, whose prices have been creeping up in recent years, will rise as much as 15% starting this fall.

"No one expected the weak dollar to last this long or get weaker," said Burke.

The profit outlook isn’t pretty. Retailers have been forced to absorb costs at the expense of profits but can’t do it any longer, since the holiday period accounts for about 40% of merchants’ profits and 50% of sales, says Ken Perkins, president of research company RetailMetrics LLC. The retail industry is set to report an overall profit drop of 5.2% for the current quarter compared to a year earlier, what will be the fifth consecutive quarterly declines.

Read "Shoppers to face higher prices on holiday goods" here.

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