Forecasters Again Predict a Less-Grim Holiday Sales Slump

Mass Retailers Expected to Gain, While Home Goods, Electronics Marketers Set for Pain

By Published on .

NEW YORK ( -- The forecast might not be as bad as last year's shockingly dismal holiday season, but it still won't be a happy holiday for the nation's retailers.

A tough holiday season could spell another pullback in advertising among retail's top spenders.
A tough holiday season could spell another pullback in advertising among retail's top spenders. Credit: AP
The National Retail Federation is predicting November and December sales will decline 1%, compared to a 3.4% decline a year ago. Over the past 10 years, holiday sales have risen an average of 3.4% annually. The International Council of Shopping Centers, meanwhile, is predicting a 1% rise in sales. And consultancy Retail Forward is expecting sales will be flat.

Any of those predictions would still make this year the second worst holiday season in some four decades, behind only last year. But one has to wonder whether even those predictions are a bit upbeat. A year ago Retail Forward predicted sales would grow by 1.5%, while NRF said sales would rise 2.2%. Both predictions were off significantly. NRF has been tracking holiday sales since the mid-1990s, and Retail Forward since the 1970s.

A tough holiday season could also spell another pullback in advertising among retail's top spenders. Last year, the top 10 retail spenders slashed their measured media spending by 3.3% to $1.88 billion from $1.95 billion during the fourth quarter, according to TNS Media Intelligence. Walmart, which boosted its spending 30% during the period, made up for double-digit cuts at JCPenney, Kohls, Best Buy, Gap, Home Depot and Lowe's.

Numb consumers
Still, there is a sense among the retail industry that consumers are adjusting to a new normal. The dire headlines that struck fear into the hearts of consumers a year ago are, in many cases, not any less dire, but consumers have become accustomed to them.

Unemployment rose to 9.8% last week from 6.2% a year ago. And the housing market continues to suffer. The stock market, on the other hand, has shown some signs of life recently.

"This year's holiday season spending will be a lot better than last year," said Michael Niemira, chief economist at the ICSC. "The wear-and-tear of the recession and financial crisis on the consumer psyche is slowly giving way to renewed hope, optimism and most likely, gift buying."

Analysts are also pointing to better-than-expected sales in August, as a sign that consumers are beginning to spend again. Same-store sales still declined 2% year-over-year during the month, and September data are due out Thursday.

"Softer August retail sales declines are signs of an emerging retail recovery that will be driven by growing confidence among households," said Frank Badillo, senior economist at Retail Forward. "This is positive news, as we move into the critical holiday season, but the economic environment will remain difficult."

Retail Forward predicts that apparel and accessories categories will see a 2% decline during the fourth quarter of this year, compared to a 9% drop a year ago. Mass retailers, including discounters, will continue to be a bright spot, outperforming last year, with sales expected to rise 2.5%, compared to 2% a year ago. Home goods, consumer electronics and home improvement retailers will continue to struggle.

"The expectation of another challenging holiday season does not come as news to retailers, who have been experiencing a pullback in consumer spending for over a year," said Tracy Mullin, NRF's president-CEO. "To compensate, retailers' focus on the holiday season has been razor-sharp, with companies cutting back as much as possible on operating costs in order to pass along aggressive savings and promotions to customers."

Most Popular
In this article: