What Seasons Greetings Have Retailers Received from Consumers?

If retail is seen as the last stand of the economy, then, whenever there is an economic retreat for any reason--be it the Internet bubble burst from last cycle or the credit crunch at current stage, retail quickly becomes the converging point for all the upcoming pressures. And representing all consumer spending, which is roughly two-thirds of the ongoing economic growth, retail has to be continuously holding out strongly in order to attain such a growth. The other one-third of the economic growth that is traditionally realized by corporate spending on new investments would not be sustainable moving forward, if the resulting increased productions and services had never been supported by new consumer demands at the retail level. Whichever road or course taken in tracking or studying the economy, at the end of it, everyone has to follow this big, visible conclusive sign that is pointing to this mall of retail complex. Associated with all consumers, retail is forever the ruling king of this nation called economic growth.

While conflicting retail sales reports and analysts' different opinions are all flying out and crashing into each other in the financial press as the season progresses, one thing that does not waver is the customary way people as consumers go about their holidays. Gift purchases as not being subject to discretionary check out in the consumer line are always the one gift itself to retailers. When a shopping list ends on the back of a sheet of paper, that's a lot to buy. And with the affordability provided by the discount practice, that is, for $10-$20, one can get a decent gift pack, the shopping cart is going to be filled like groceries--that's a lot to have been bought. Expect retailers to stand steadfastly with their sales promotions, which must be resorted to when having to ensure a smooth flow-in-and-out of inventories to keep business rolling.

The traditional December sales reports have been in a way distorted by the invention of gift cards, because sales are not reported until cards are used later on. If everyone is giving each other only a gift card on Christmas Day, we wouldn't have a December sales report, would we? For reporting purpose, this is how recording is done on a retailer's accounting books: when cash is received from issuing a gift card, no sales revenue is recorded, but instead a liability marked as unearned revenue. Then, over time as gift-card redemptions occur, the retailer repays back its liabilities by replacing unearned revenue with recording the actual sales of its merchandises. For people looking for a complete sales report, wait until January when many gift cards are expected to have been redeemed through the post-Christmas sales. But the very accounting practice also have some implications on financial analyzing of a company's business. Income Statement would be negatively affected by the delay of the actual sales on the revenue side. So, investors shouldn't be surprised when a retailers reports less than expected earnings, and thus, penalize the company by dumping their stock to depress the share price. However, positive effects would be exerted on Balance Sheet and Statement of Cash Flows. Again, investors should know the story line when a retailer reports a bigger asset base and a larger chunk of cash in hand. The reason those two pieces of information are preceived as positive is because that companies are supposed to grow their assets over time through both retained earnings and outside funding(cash receipts from gift cards are a temporary funding), and the improved availability of cash dictates the more effective allocations of monetary resourses among all asset items. With all that, financial anlyzing becomes very tricky in the presence of gift-card recording.

While it's easy to dismiss any hope for an escalated shopping spree this year amid all the issues the economy has to deal with, as always, it's a holiday season, and it's going to be shopping season. It's the way of life and for all retailers, expect not more, not less, but what's fair. And most importantly, the over job market has not shown any sign of tumbling--it will not. As we see drop offs in housing and financial related sectors, there will be pick ups from other parts of the economy that never had the same troubles self-inflicted on themselves in the first place, such as smaller community banks and internationally-oriented real estate pursuits, which are still functioning. It takes innovation in changing direction to continue to grow, with new jobs, increased production, and therefore, lasting consumption.