Analysts predict weak holiday sales
Excess inventory, reluctance to buy may hobble retail
NEW YORK - After parents cut back on clothes and accessories for children this past fall, the retail industry suspects they won’t be any more generous by the holidays.
The National Retail Federation, usually bullish about holiday sales, predicts a 1 percent decline in total sales to $437.6 billion for November and December combined. The projection from the world’s largest retail trade group comes amid forecasts that US retailers saw a key measure of sales drop in September for the 13th month in a row compared with a year earlier.
The NRF is less optimistic this year than several other groups offering holiday sales forecasts.
“We just don’t see a sharp turnaround in consumer sentiment and spending until employment and income look a lot better,’’ said Rosalind Wells, the group’s chief economist. “Shoppers are going to remain very frugal.’’
NRF’s figures exclude sales from restaurants, gasoline, automobiles, and online business; they include low-price retailers, department stores, grocery stores, and specialty stores.
Last year, the Washington-based NRF issued a 2.2 percent growth forecast in mid-September just as the financial meltdown ballooned. The trade group decided not to offer a reduced estimate because the spending climate was deteriorating so quickly that forecasters couldn’t be accurate. The industry ended up having the weakest holiday season - when compared with the previous year - since at least 1967, when the Commerce Department started collecting retail sales data.
So far, holiday 2009 forecasts range from as weak as a 3.5 percent decline from Wells Fargo senior economist Mark Vitner to predictions at the top end from Deloitte Research and TNS Retail Forward that sales will be the same as last year.
Job security is a key factor in consumers’ ability and willingness to spend, and the latest government jobs report, issued Friday, fueled more concerns about the holiday shopping season. The figures showed unemployment ticking up to 9.8 percent in September, a 26-year-high, and employers shedding 263,000 jobs.
Those seeking work also have fewer prospects: The average time to find a job is 26.2 weeks, up from 19.8 weeks in January. Meanwhile, shoppers continue to grapple with tight credit and dwindling net worth.
Last fall’s steep and swift spending drop came too late for retailers to cut their inventory or orders, which left them with no option but to steeply discount the piles of merchandise already headed for their stores.
Analysts expect stores won’t be in the same panic mode this year because they have cut inventory, but there still will be generous deals and stores might have a hard time predicting what shoppers want.
According to a recent study by BDO Seidman LLP, a leading accounting and consulting firm, 60 percent of finance executives at top US retailers say there is greater risk for stores in having too much inventory than not enough.
BMO Capital Markets analyst John Morris estimated that the volume and level of discounts at the 25 mall-based apparel chains he follows already are up 5 percent even though they have 15 percent less inventory than a year ago.
“We are not seeing any consistency in consumer strength. The consumer is responding to need and promotions,’’ Morris said. “We will likely have a disappointing holiday season.’’