Gilford Securities: Holiday Shopping Season Will Hurt Retailers Bottom Line

Bernard Sosnick of Gilford Securities released a cautious note concerning the upcoming Holiday shopping season. “Elasticity for holiday spending appears unlikely to offset gross margins reductions caused by price competition and free shipping offers,” Sosnick wrote in a note on Tuesday. “Retail profits will probably be pressured – including

Sosnick believes that retailers that do not benefit from a “plump profit cushion” to absorb the ultra-competitive and discounting environment will be hurt the hardest. As an example,

is battling against Amazon.com fiercely to “assert price leadership” which may come at the expense of its return on investment. Some retailers may have it a bit easier. For example,

offer of free shipping from online orders is “potentially costly gambit to obtain sales,” according to Sosnick. However, the analyst adds that around two-thirds of its online orders already qualify for free shipping, making Target's promotion “not as radical as it appears.” Looking forward to the 2015 Holiday shopping season, Sosnick notes that “it will likely be impossible for retailers to avoid meeting lowest prices.” The analyst also claims that retailers that are unable to allocate sufficient capital into developing e-commerce capabilities will be “left behind” as a “slide toward shakeout of weak retailers is accelerating.”