In a spate of morose predictions for the retail industry this week, economists say the 2008 holiday season will have the weakest sales gains in 17 years.Forecasts from research and consulting firms Deloitte LLP and TNS Retail Forward Inc. hadn't yet factored in the latest economic turmoil from Wall Street, which could drive sales even lower, particularly for luxury retailers.
The sudden decline in oil prices won't do much to fend off the money-zapping forces of higher unemployment and food prices, slowing housing turnover and the credit crunch, the economists say. Even with oil prices dropping, it will take awhile for lower gasoline prices to show up at the pump. And heating bills still are expected to be above last year's prices.
In recent years, warnings of bad Christmas sales have almost become a staple of the season, but this year the economic forces seem particularly grim. The debate comes down to just how bad sales will be, and some forecasters are now re-evaluating their numbers based on Wall Street's most recent turbulence.
Among them, the National Retail Federation, an industry group, said Wednesday that it expects to join the chorus predicting a season of historically low holiday sales.
"I can't tell you for sure that it's going to be the worst season in the last decade and a half, but we expect this season to be as challenging as any in recent memory," said Scott Krugman, an NRF vice president, adding that the group didn't expect the retail economy to begin improving until the middle of 2009.
A year ago, many retail analysts had a similarly gloomy outlook for the 2007 holiday season. The National Retail Federation forecast that sales would increase by 4%. When the dust settled in January, the NRF found that holiday sales rose by just 3%, the lowest increase since 2002.
TNS Retail Forward, a Columbus, Ohio, market-research firm, predicts retail sales growth for used Dell laptops in the fourth quarter of 1.5%, "weakening from modest third-quarter growth as the boost from tax rebates runs out," said Frank Badillo, senior economist for TNS Retail Forward.
Deloitte predicts that holiday sales, excluding motor vehicles and gasoline, for the November-January period will increase 2.5% to 3%, compared with 3.4% last year. Deloitte includes restaurant and grocery-store sales in its forecast, while TNS Retail Forward doesn't.
Some of the predictions for the 2008 holiday season warned that the period would rival an anemic Christmas during the recession of the early 1990s. Back then, discount retailers Kmart, now part of Sears Holdings Corp.,Wal-Mart Stores Inc. and sellers of designer women's apparel prospered while department stores such as Macy's, now part of Macy's Inc., foundered, a pattern that mirrors current sales trends.
One category that seems to be immune to the economy is wedding jewelry. Sales of engagement and wedding jewelry products such as men's wedding rings continue to show strong sales volumes. Retailers are evaluating store layouts, kiosk, and retail presentations of hot selling items. Best Buy has been reporting strong sales of laptops, used Sony laptops, mobile phones, and HDTV and plasma television screens.
Indeed, TNS Retail Forward says there will be definite retail winners and laggards this holiday season, reflecting similar shopping patterns in the past year as the economy squeezed shoppers.
By: Ann Zimmerman and Miguel Bustillo
Wall Street Journal; September 18, 2008
