Will shoppers skip the mall this Christmas?

Mall Santas, bring a book. The nation's shopping plazas are drawing fewer customers, a trend that has some retailers and retail analysts lowering expectations for the holiday season.

By MSN Money Partner Oct 24, 2013 3:20PM

Image: Santa Claus © Corbis By TheStreet.com

 

Consumers aren't buying from retailers -- at least not at the mall. TheStreet.com

 

They may be making purchases online, through mobile devices or hitting up discount retailers like TJX (TJX). But they’re certainly not shopping at the mall, and that has analysts concerned about the upcoming holiday season.

 

The mall was once seen as a destination for individuals and families alike, spending an hour or the day walking around, eating at the food court, popping in and out of stores. Today, as the world turns increasingly digital and mobile, the idea of shopping in a mall is being beat out by quicker, cheaper and easier shopping methods, such as Amazon (AMZN) and eBay (EBAY).

 

The latest findings of a ShopperTrak survey show that mall traffic has been on a decline this year, starting in earnest in the second quarter and continuing over the next few months. The data doesn't bode well for the all-important holiday season.

 

"ShopperTrak has shown a steady decline in mall traffic of late, with QTD trends down 3.2%, continuing the weakening trend that began in earnest in 2Q," Deutsche Bank analyst Paul Trussell cited in a research note on Tuesday. (TheStreet could not get ShopperTrak to confirm the data by press time.)

 

Lowered targets

In the note, Trussell lowered price targets for three mall-inhabitants: Nordstrom (JWN), J.C. Penney (JCP) and Macy's (M), but upped his recommendation on non-mall retailer Kohl's (KSS) to "hold" from "sell" and increased his price target.

 

There seem to be several reasons why mall traffic is down, starting with the uneven economy leading shoppers to seek out increased value (i.e. quality goods at lower prices), a teen segment that has a higher percentage of unemployment than the national average, and perhaps most importantly changing preferences for digital and mobile options.

 

"We believe the department store sector has experienced market share shifts to off-price retailers and specialty/vendor shops as well as a crowding out to other pockets of retail, particularly home improvement. On average, our department store 3Q comp moves down 70 bps to 0.3% (excluding JCP), which compares to 2Q SSS results of 1.5%. With estimates once again being reduced, we continue to see department stores as one of the less attractive sectors in retail and within our coverage universe, we prefer exposure to the dollar stores," Trussell writes in the note.

 

Sales overall should rise

The National Retail Federation predicts holiday retail sales (encompassing retail sales in November and December) this year to rise 3.9% to $602.1 billion, slightly ahead of 2012's actual holiday season sales growth of 3.5%. The forecast is higher than the 10-year average holiday sales growth of 3.3%.

According to NRF, the holiday season can account for anywhere from 20% to 40% of a retailer's annual sales, and accounts for approximately 20% of total industry annual sales.

 

This year, consumers' preference for larger ticket items such as cars and items for the home are supporting holiday sales forecasts, however the uneven economy and wariness regarding fiscal concerns along with the recent government shutdown could further impact holiday sales, the NRF said.

 

"The retail sector has been challenging, with weakening traffic trends in September, particularly at the end of the month as political/macro headlines stole the show," Paul Lejuez of Wells Fargo Securities, writes in an October 11 note. "It's rough out there, in our view."

 

Teen retailers hit hard

Retailers across the board have been paring back their back-half-of-the-year expectations. But teen retailers like American Eagle Outfitters (AEO), Abercrombie & Fitch (ANF) and Aeropostale (ARO) seem to be taking the lower mall traffic particularly hard.

 

"Continued negative mall traffic, aggressive promotions and inventory growth running +1% above sales growth vs. -1% below (last year) put pressure on margins," Citigroup analyst Oliver Chen penned in a research note on Thursday.

 

"We are cautious for holiday given teen employment at 20-25% vs. [approximately] 45% pre-recession, back-to-school challenges" as well as the potential for further decelerating same-store sales comps and promotions that aren't successful, Chen added. He lowered fiscal-year earnings estimates and 12-month price targets on American Eagle and Abercrombie.

 

That said, as mall traffic continues to decline, mobile and e-commerce shopping will continue to grow, driving sales for retailers, he says.

 

"Last year, holiday retailers grew e-commerce an average of [approximately] 34%, thus we expect growth this year to be 15%-20%, primarily driven by an increase in mobile device sales," Chen wrote.

 

-- Written by Laurie Kulikowski in New York.

 

More from TheStreet.com:

 

69Comments
Oct 24, 2013 8:29PM
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shopping would be 100% more fun if ten minutes at the register wasn't spent being asked for your phone number, email, address, sign up for a card, blahhhhhhhhhhhhh stop it god.
Oct 24, 2013 10:40PM
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I am sick and tired of analysts projecting higher or lower 'expectations'  for Christmas.
It's a religious holiday,  not a damn profit opportunity.
Geez.

Oct 24, 2013 8:31PM
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Christmas is not & has never meant"what did you get me" I mean really? that is why this country & people are in debt up to there eyeballs & the banks & ceo & coo & on & on laugh at Christmas! It is a "hallmark holiday" anymore and the stores have been gearing up for it all year .in fact they start right after Christmas day! Now the stores are decorated before the 2nd week in October that by the time Christmas gets here "most people "are so stressed out from having it shoved down the throats that they can't really enjoy it! 'Our family has finally gotten to the point that we give to one another all year long ,we ARE not going to spend money especially today on garbage that falls apart or the "new" is already being replaced with the newer the very next day! We need to celebrate what the true meaning us PERIOD! Sure I was a child,Im not saying Don't allow the children to have that special day,not at all what I'm saying is once you reach the point where you really know where the gifts are coming from, STOP! Don't put your parents & grand parents in debt so they do without or stress out the rest of the year trying to make up for the loss of money? Its harder today on most people & they feel obligated because they want there children no matter what age to enjoy the day,"peer pressure" does this! All I'm saying is with the world & economy the way it is today and with all the homeless,and vet's that have nothing ,its time to start a "new tradition" only for the children & the rest of us "ADULTS" we have enough just be happy to get together over a nice dinner to those who have close family & to those that don't ,go visit a nursing home, that will make the day really special on someone there but mostly you! Ok getting off my soapbox, I just think "we" have made enough greedy people rich & its time to start helping the real ones in need ,the forgotten ones, that will make a wonderful Christmas Day but you have to start ?
Oct 24, 2013 8:31PM
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The days of the mall have passed. I haven't gone to one for Christmas shopping in years. Just too many people and no place to park!
Oct 24, 2013 11:14PM
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Gosh... sorry to offend the masses, I LOVE the season! I love the religious meaning. I love seeing my family. I love baking. I get a little stressed out from all the planning. I enjoy decorating. I enjoy taking time to find a great gift for the ones I get a gift for. I donate to a charity and the local food bank. I enjoy the music, the old classics. I do not shop at malls that often. I have removed any store that will open Thanksgiving and take people away from families from my list of places to shop. So, no mall for me. Online, small local shops or homemade gifts are the trend for me.
Oct 24, 2013 10:58PM
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Why should I endure heavy traffic, trying to find a  parking spot, pushy sales kids, rude people in general, or long slow checkout  lines? I can sit in the comfort of my own home after doing a little online research (going to @ least 3 sites comparing reviews) with a few clicks of my mouse get the best deals possible off amazon.com and not even have to leave my driveway. United Parcel Service will deliver my orders right to my front door. If you are an Amazon Prime member you get two shipping on most all products sold directly through Amazon too! Many people go insane over Black Friday "deals."  I used to work retail and believe you me those "deals" are really nothing of the sort. The retail electronic shops (ala BestBuy) tend to push products that have not sold well off as Black Friday deals, or el cheapo quality items special ordered just for Black Friday. Those of you who are planning to mall shop I wish you well, but not I said the fly!
Oct 24, 2013 7:32PM
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After making those Obamacare premiums, you won't have any money left for Christmas anyway!

Oct 24, 2013 7:49PM
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I think people need to spend as much time on their knees praying to God as they spend looking for "Things" from Santa Claus in the mall !!!!!!!!!!.........Grow up America !!!!!!!!!
Oct 25, 2013 12:09AM
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Why shop in a mall anytime during the year, much less the holidays?

 

Several years ago, started to shop in spring and summer for the next Xmas.  No impulse buying and could keep a better handle on spending.  Also used trips and vacations to find things that were unique and more suited to the giftees,

Oct 25, 2013 12:06AM
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Not only will I not be going to the malls, I will not be doing any Christmas shopping on Thanksgiving Day.   I work too hard to spend my day off  "working" hard at shopping.  Instead, I want to enjoy my holidays relaxing, not being pushed and shoved by tired, up all night, inconsiderate shoppers, and going to stores that never have enough workers to handle all the customers.   Last year I got better bargains the week before Christmas, than what the same items sold for black Friday weekend.  I might just stay home completely this year and try Cyber Monday. 
Oct 25, 2013 7:49AM
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Don't think I'll be seeing much of the mall this year, little bit tough on Social Security.  Might try to make the grand kids some things and take them to red rock canyon or some fishing.  Not sure yet.  I always do a lot of Christmas baking for them and if we have some cash left over, probably give them some so they can get what they want.  So....no mall for us.
Oct 25, 2013 8:08AM
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Shoppers will skip the malls and a lot more this year. The government has pretty much wiped out the middle class. Economic growth has been an illusion brought about by the whimsical CPI that has led to a GDP deflator that is fractional at best. The affordable care act has driven another nail into this coffin. How do you expect a family earning $50K that gets their heath insurance costs doubled to afford as much for christmas?

 

It will be interesting to see how this plays on Wall ST. Whether it's time to belly up to the bar for another round of stimulus, or to see the looming recession  

Oct 25, 2013 8:16AM
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The last thing I bought at a mall store was my 2013 calendar, but that was only because the store I always bought it from for the past several years, Borders, went bust. Outside of that, I stay miles away from malls.

Besides, most of my gift recipients ask for gift cards now anyway, and you don't need to go to a mall to buy them. Supermarkets now sell most major gift cards.
Oct 24, 2013 9:12PM
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I enjoy helping mess up the holiday shopping predictions...I give cash-in-a-card :)
Oct 25, 2013 8:36AM
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I have refused to participate in the Christmas money grab for several years now.  I see no reason to participate this year either.
Oct 24, 2013 7:35PM
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I've stopped shopping the malls because there are no shopping carts.  Who wants to shop where you  have to keep going out to your car with your purchases.  I do physically shop at stores with carts to put stuff in.  Otherwise, it's usually gift cards or checks.
Oct 24, 2013 10:42PM
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The reality is that on line shopping has taken over sales from the malls.   Why would you drive to the mall to buy golf equipment?   You can also shop off the various shopping sites on TV.    The mall likely will always be there but not the way it was in the past.
Oct 25, 2013 9:04AM
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Given the economy..., people are probably sneaking down to Wal-Mart at 3am to do their shopping.  Wouldn't want their neighbors to see them patronizing "the evil empire"---but more than happy to save a few of their own dollars.
Oct 25, 2013 7:06AM
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I havent gone to a mall in years and years.  Nor do I go to the likes of Walmart ect.  And I refuse to go into debt to finance Christmas.  The last time I did, I stood in line for an eternity to get a tickle me Elmo and it almost got me killed when the crowd decided to stampede...I havent been back since.  My teens get one large gift that I would have purchased anyway such as a computer ect.  a few school clothes (which kids hate) and thats it. 

My husband and I have always started saving for that one big gift around June or so and there is no extra debt come Christmas.  It works for us.  My gift to me, I save back 100 dollars or so for one new Christmas decoration that I buy on sale AFTER the holidays.

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