Despite continuing uncertainty over the economy and a tight presidential election race, the retail industry is looking for a modest increase in holiday sales this year.


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Inside This Issue - News

Holiday forecast up

October 15th, 2012

NEW YORK – Despite continuing uncertainty over the economy and a tight presidential election race, the retail industry is looking for a modest increase in holiday sales this year.

The National Retail Federation (NRF) projects that holiday retail sales (November and December sales excluding auto dealers, gas stations and restaurants) will increase 4.1% to $586.1 billion. That prediction is higher than the 10-year average holiday sales increase of 3.5%, but short of the 2011 growth of 5.6%.

"This is the most optimistic forecast NRF has released since the recession," notes Matthew Shay, president and chief executive officer of NRF. "In spite of the uncertainties that exist in our economy and among consumers, we believe we’ll see solid holiday sales growth this year."

Shay acknowledges that a number of variables could affect the outcome, including the presidential election next month, confusion about the looming “fiscal cliff” — the automatic budget cuts and tax increases estimated at $500 billion that could kick in on January 1 — and concerns about future economic expansion caused by weak job and income growth and an unemployment rate that continues to hover around 8%.

ShopperTrak, a retail technology company that tracks store traffic in more than 50,000 stores in the United States, forecasts a 3.3% sales increase driven by a 2.8% rise in retail foot traffic. "Retailers have reason to be optimistic about this season," says Bill Martin, founder of ShopperTrak. "It’s clear that foot traffic is increasing and month-over-month sales continue to be better than expected. Our shopper visit data tell us that consumers are visiting more stores than last year."

Martin points out that the season will be longer this year, with 32 days between Black Friday and Christmas and with two extra weekends.

For its part, Deloitte foresees a holiday sales lift of 3.5% to 4% during the November-to-January span (excluding motor vehicles and gasoline). That rate is below 2011’s 5.9% growth.

"Economic headwinds nagging consumers this fall include stubbornly high gasoline prices that continue to creep up and soft housing and job markets," says Carl Steidtmann, Deloitte’s chief economist. "While consumers turned out in the summer to give retailers solid gains for a few months, that pace may be difficult to sustain through the end of the year."

Deloitte further projects that mobile-influenced retail store sales will make up 5.1%, or $36 billion to holiday store sales as consumers use their smartphones for product research, price comparisons and mobile applications. Deloitte research suggests that shoppers equipped with smartphones are 14% more likely to make purchases in-store than those who do not use them.

The International Council of Shopping Centers (ICSC), meanwhile, is cautiously forecasting a 3% increase in November-December sales, pointing to higher-than-usual economic and political uncertainty. ICSC vice president of research and chief economist Michael Niemira says that sales could get a significant boost if Congress resolves the budget and tax issues promptly and thereby assuages consumer fears.

According to Capital Business Credit, a nonbank lender that services the retail sector, its quarterly Global Retail Manufacturers and Importers Survey reveals that 33% of importers have received higher year-over-year orders for the holiday season, while 44% said they have received the same level of orders. Of importers polled, 43% expect stronger holiday sales this year.

Based on its research in consumer attitudes and behavior, consulting firm Booz & Co. expects slight sales growth at best during this year’s holidays. The company’s Holiday Retail Outlook 2012 finds consumers very cautious and focused on finding affordable deals.

At the same time, it notes that 53% of consumers polled intend to buy at least one luxury item this year, compared with 41% last year. Booz expects home entertainment and apparel to be hot categories, while saturation may depress electronics sales.

Interestingly, the Booz forecast sees such downloadable gifts as e-books, movies and iTunes music downloads growing and becoming a distinct category this year. Online sales should see another growth spurt, according to both NRF, which projects holiday online sales to grow 12% to $96 billion, and Deloitte, which sees a 15% to 17% jump in nonstore sales, with 75% of that coming from online commerce.

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