Pilot Pen G2 Edge

MMR Industry Outlook: Retailers’ growth prospects get brighter

Print Friendly, PDF & Email

NEW YORK — Encouraged recently by improved monthly sales results, retailers are looking forward to a year of growth in 2010.

Encouraged recently by improved monthly sales results, retailers are looking forward to a year of growth in 2010.

By most accounts, retail sales will see a modest gain, on an annual basis. Yet any advance will be a welcome change from 2009, when retail trade sales fell an estimated 7% to $3.68 trillion, according to the Department of Commerce.

For the first quarter of 2010, retail trade sales totaled $896 billion, up 6.4% from a year earlier, the Commerce Department said. The most recent monthly report, for March, shows retail trade sales edging up 1.8% from February, higher than the previous month-to-month gain of 0.3%.

The National Retail Federation and market researcher Retail Forward both project retail sales to rise around 2.5% for 2010. In terms of consumer spending, Citigroup predicts a 2% increase this year, the National Association for Business Economics forecasts a 2.2% gain and the Conference Board predicts a 1.9% uptick.

In fact, the Conference Board expects consumer spending growth to taper off during 2010, falling from a 3.1% increase in the first quarter to 1.7% in the second, 1.6% in the third and 0.9% in the fourth quarters.

“Recent economic indicators suggest that consumer spending was better than anticipated in the first quarter,” explains Conference Board chief economist Bart van Ark. “However, much of this improvement comes in nondiscretionary services, like medical insurance premiums or utility bills, and nondurables, like clothing or dining out. Consumers remain cautious about spending on big-ticket durable goods.”

Concerns about employment, income and debt continue to weigh on shoppers, and many are steering more money into savings — all of which could affect consumer spending, notes van Ark.

Conversely, Retail Forward predicts retail sales to get stronger in 2010. It projects retail sales, excluding the auto and fuel channels, to rise 1.5% to 2% in the first two quarters of the year and then climb 3% to 4% in the final two quarters.

“Renewed job and income growth will ultimately outweigh other drags on the recovery, such as tighter credit availability and new credit regulation,” observes Retail Forward senior economist Frank Badillo.

According to Retail Forward, retail sales growth this year will be led by the channels that performed best during the holidays: nonstore and online retailers; food, drug and mass chains; and soft goods retailers. The researcher expects sales for the food, drug and mass channel to gain 2.5% in the first half and about 4% in the second half.

Of those retailers, the discount segment, including warehouse clubs, has the best prospects for 2010, according to Fitch Ratings.

“Discounters are expected to continue to benefit in 2010 from increased traffic and market share gains as consumers look to maximize value on all purchases, including food and consumables as well as general merchandise,” Fitch stated in its “2010 U.S. Retail Outlook” report.

Supermarkets will feel pressure from price wars and from other retail competitors, the report continued, while robust prescription business will more than offset weak front-end sales at drug chains.

“In 2010, overall retail sales are anticipated to be flat to up modestly from 2009 levels,” the report said. “Same-store sales comparisons remain easy through September 2010 and, therefore, same-store sales could flatten or show improvement from 2009 levels.”

For the near term, at least, strong Easter sales have given new cause for optimism, retail analysts say. “While the positive impact of the Easter [calendar] shift helped to drive better-than-expected March same-store sales results, we believe underlying same-store trends at the retailers in our coverage universe are strengthening,” Deborah Weinswig of Citi Investment Research wrote in a research note.


You must be logged in to post a comment Login