Retailers' Main Metric: No Discounts This Year

It doesn't matter that sales are "mixed." It doesn't matter that sales were flat vs. last year. It doesn't even matter that you heard more traffic but fewer sales.

What matters is the way retail is as a business. To a retailer, for this holiday, the companies have decided, after last year's disaster, that they are not going to discount aggressively. They will put in loss leaders, but they will not give merchandise away.

We heard that from Jim Sinegal, the CEO of Costco (COST - commentary - Trade Now), when I spent the morning with him recently. He said that he was not going to lose money on anything he sold this Christmas. What a difference from last year, when he was caught long a huge amount of expensive TVs that he took a beating on.

We have also heard that J.C. Penney (JCP - commentary - Trade Now), Kohl's (KSS - commentary - Trade Now), Macy's (M - commentary - Trade Now) and TJX (TJX - commentary - Trade Now) simply didn't go out on the limb either.

If you know how close they are playing it, go listen to the amazing call by Mickey Drexler at J. Crew (JCG - commentary - Trade Now), where the biggest issue was whether there is enough inventory. Williams-Sonoma (WSM - commentary - Trade Now) had the same issue. I would not be surprised if Sears (SHLD - commentary - Trade Now) had a similar problem.

I am not sure that Best Buy (BBY - commentary - Trade Now) played a mini-discount strategy, but that is the call that much sell-side research is stressing. Macy's, of all of these, seems most hated, but I am hearing so many good things from the "My Macy's" program and the decline in the stock from $20.75 to $16.40 that I believe the risk is most certainly out on this one.

I don't know how the macro guys can deal with their own misinformation. How many times do people like Wes Card, smart people who sold Barney's at the top of the market to interests in Dubai, have to tell you that the mantra is "no more profitless sales"? They aren't going to let it happen.

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