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Retailers stun shoppers

August is four months away from Christmas, but major retailers were already displaying Christmas decorations and products.

David Jones (ASX:DJS) had a Christmas section up on August 21, despite the fact Christmas day was 125 days away. Shoppers have reported David Jones’ Castle Hill and Southland stores with Christmas sections late last month, while some reported have that the Myer Holdings (ASX:MYR) store at Frankston in Victoria was up a week ago. Christmas sections have in the past usually appeared in October.

The major department store retailers appear to be hoping that early Christmas cheer will help to prop up struggling sales, and to overcome weak consumer sentiment. Myer last week reported a flat 2013 sales result, with profits down 8.7%, as the retailer continues to invest in IT to expand its omni-channel offering.

According to the Australian Bureau of Statistics (ABS), department store sales dropped 1.3% in July compared to the previous year, but a whopping 7.9% on a month-to-month basis. That may be due in part to the federal election, with media reports suggesting consumers were wary in the lead up to September. ABS data on retail spending has been fairly weak with a rise of just 0.1% in July, a flat June and a similar rise of 0.1% in May.

More retailers, like Harvey Norman Holdings (ASX:HVN) and JB Hi-Fi Limited (ASX:JBH) are likely to follow the lead of David Jones and Myer and attempt to entice consumers back in-store now the election has been run and in the lead up to Christmas. Many economists are predicting at least another rate cut before the end of the year, as the RBA attempts to get the non-mining sectors of the economy moving. A continuous stream of cuts to the official cash rate since November 2011 don’t appear to have stimulated the economy as the RBA would have liked – although the property market may have taken off with auction clearance rates at all-time highs.

Foolish takeaway

You can’t really blame the retailers for trying to get into the Christmas spirit early. A post-election surge in consumer spending doesn’t appear likely, although a more stable government, all-time low interest rates and rising house prices should see consumer sentiment improve.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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