As retailers race to lure customers with holiday discounts, they risk cutting into their profit margins; analyst says gross margins at broad-line chains and department stores could decrease by an average of 0.4 percentage points

Allison Oesterle

LOS ANGELES , November 22, 2011 (Industry Intelligence) – As retailers race to lure customers with holiday discounts, they risk cutting into their profit margins, Reuters reported on Nov. 21.

According to the article, most retail industry experts predict that sales growth will not greatly exceed the rate of inflation, further fueling the retailers’ fierce competition.

Robert Drbul, an analyst with Barclays Capital, says that gross margins at broadline chains and U.S. department stores are predicted to decrease by an average of 0.4 percentage points due to higher labor, product and transportation costs.

Market research company the NPD Group, Inc. reports that 81% of customers have said that the state of the economy will affect their holiday spending, an increase from 79% in 2010 and 78% of 2009.

According to survey by the Consumer Federation of America and the Credit Union National Association, while 8% of people plan to spend more this holiday season than they did in 2010, 41% of consumers reported that they intend to spend less than they did during the same period last year.

The primary source of this article is Reuters, New York, on Nov. 21, 2011.

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