For Immediate Release

December 28, 2005

LANSING — Although a majority of Michigan retailers held their margins on early sales of holiday merchandise, nearly a third reduced them in order to spur sales.

For November, the monthly Michigan Retail Index, a joint project of the Michigan Retailers Association (MRA) and Federal Reserve Bank of Chicago, found that 56 percent of retailers were maintaining their margins and 32 percent had reduced them compared to last year’s holiday period. Twelve percent said they increased them.

Essentially, "retail margin" is the difference between the retailer’s wholesale cost of an item of merchandise and the retail price the store sells it for.

"Given the flurry of early holiday discounts that retailers were offering consumers, it’s no surprise that nearly a third of them were cutting margins to boost sales," said MRA Chairman and CEO Larry Meyer. "Many retailers chose to further squeeze profits in an effort to get the season off to a fast start."

December’s Michigan Retail Index reporting on sales for the entire holiday season will be available on January 25, Meyer said. Retailers went into the season projecting, on average, a 5-percent gain.

The Index survey found that 35 percent of retailers increased sales in November over the same month last year while 48 percent recorded declines and 17 percent saw no change. The results create a seasonally adjusted performance index of 45.8, down from 48.4 in October.

In addition, 45 percent believe their sales will increase for December–February, while 26 percent forecast declines and 29 percent project no change. The results create a seasonally adjusted outlook index of 73.9, down from 78.7 in October.

The Michigan Retailers Association is the unified voice of retailing in Michigan and the nation’s largest state trade association of general merchandise retailers.

Note: William Strauss, Senior Economist and Economic Advisor with the Federal Reserve Bank of Chicago, can be reached at 312.322.8151.