Sales have already been lackluster at many small businesses this year. And two new reports suggest they won’t have much comfort and joy this holiday season either.
A new analysis by Sageworks, a financial information company, found that sales at privately held companies with less than $5 million in annual revenues have grown a measly 0.6 percent on average so far in 2013. Compare that with more than 7 percent sales growth annually in 2012 and 2011. Profit margins, thankfully, have reached a lofty 10.6 percent this year—their highest level in at least five years—but companies will have a hard time maintaining those high margins if sales growth continues to wane.
And unfortunately, the holiday sales outlook looks quite grim. Who’s the Grinch who stole Christmas? The United States government.
“When you’ve got these cuts in federal spending, this political impasse in Washington over fiscal matters and this uncertainty over whether the market can sustain job growth, all of these things contribute to uncertainty,” Sageworks analyst Regan Camp says in a news release. “I just think that people who had been optimistic the last year or two all of a sudden are tempering those expectations and are consequently cutting back on spending.”
Another new survey also suggests that the recent government shutdown hurt business owners’ holiday spirit. Before the shutdown, 30 percent of business owners were optimistic about the holiday shopping season, while 21 percent predicted falling sales, according to a survey by Manta. Since the shutdown, 43 percent now expect sales to drop, and only 13 percent are optimistic.
Retailers already had the odds stacked again them this year: With only 26 days between Thanksgiving and Christmas, the upcoming holiday season is the shortest since 2002.
The National Retail Federation predicts a conservative approach to spending this holiday season amid economic uncertainty and consumers cutting back. It forecasts that holiday sales will increase 3.9 percent to $602.1 billion even as the average holiday shopping tab slips 2 percent to $737.95.
Read my article on strategies small and independent retailers are using to draw crowds into their stores this holiday season.
Read more articles on holiday shopping.
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