Wary Christmas: Despite Strong Economy, Retailers Lack Cheer

Given an improving economy and strong earnings in the just-completed quarter, you'd think retailers would be optimistic about the current holiday period. Think again.

Despite reporting bright third-quarter results, few retail companies expressed particular confidence about how they will do in the always crucial fourth quarter, when most retailers receive the bulk of sales -- and profits.

Most economists are quite upbeat, and some retail analysts expect a blowout quarter. Others think it will be much less impressive, and there is particulary concern about chain-store operators.

"I think some of that caution is understandable, since in the recent past any optimism was not a positive thing, because sales have come in below plan," said Michael Niemira, a retail analyst and vice president of Bank of Tokyo-Mitsubishi. "The cautiousness is, to a degree, 'let's not repeat the mistakes of recent years.'"

The main thing that retailers have going for them this year is the last year was so bad, and comparisons will be easy. Last year, retailers experienced one of the worst holiday seasons in recent memory. Indeed, some observers suspect retailers are sandbagging expectations for the fourth quarter.

"A lot of guys understand the game," said one buy-side analyst, who requested anonymity. "They want to beat expectations, so they keep expectations low."

Russell Jones, president of Decisive Retail Technology, an industry consulting firm, says, "there's no reason not to expect a really strong Christmas season for a large number of retailers," especially compared to last year's weak sales.