Holiday sales this year will be the weakest in 17 years, growing just 1.5% year-over-year in the fourth quarter – the lowest since 1991’s 1.2% Q4 growth – for combined key holiday retail segments, TNS Retail Forward forecasts?(via Retailer Daily).
“The holiday sales forecast represents a weakening from modest third-quarter growth as the boost from tax rebates runs out,” said Frank Badillo, senior economist for TNS Retail Forward. “The benefit from a letup in gasoline prices will be overwhelmed by the impact of rising unemployment, tighter credit and other hardships on households. And, unfortunately, the trends in economic conditions offer no sign of an impending recovery.”
Included in the forecast are the key retail sectors – where many holiday gifts are traditionally purchased – known as GAFO (general merchandise stores such as conventional and discount department stores, supercenters, warehouse clubs, apparel stores, furniture, home furnishings, consumer electronics and other specialty stores) as well as home improvement stores, catalogs and online sales.
Holiday retail sales results* (fourth quarter year-over-year growth):
- 1997: 4.70%
- 1998: 6.80%
- 1999: 8.20%
- 2000: 3.90%
- 2001: 2.20%
- 2002: 2.80%
- 2003: 6.00%
- 2004: 6.50%
- 2005: 7.00%
- 2006: 3.80%
- 2007: 2.70%
- 2008FC: 1.50%
*For GAFO, Home Improvement and Non – Store Retail Lines of Trade; sources: US Department of Commerce and TNS Retail Forward.
“Our topline forecast separates into two distinct groups – the leaders and the laggards,” Badillo said. “Sustaining above-average growth will be non-store and mass retailers. They will see combined growth near 6.0% in the fourth quarter. Continuing to troll the depths will be the homegoods and softgoods retailers where growth is expected to decline 1% or more.”
Anticipated key retail sector holiday sales performance:
- Mass retailers will see a pickup in performance this holiday season as a result of a shift among shoppers toward value formats and the impact of higher food prices. TNS Retail Forward forecasts 5.6% combined growth, nearly a full percentage point stronger than last year. Supercenters and warehouse clubs will remain among the best retail performers while discount department stores will be the laggard of the channel.
- This year’s letup in retail sales among apparel and accessory retailers as shoppers become increasingly value-oriented will continue to take a toll on the softgoods sector this holiday season. Sales at apparel and accessories channels are forecast to decline 1.3% in the aggregate in the holiday period compared with flat growth in 2007. Department stores, including the upscale players, will remain the biggest drag as upper-income households become increasingly vulnerable to economic pressures. Apparel and other specialty stores are expected to register flat growth this holiday season.
- Homegoods channels will see sales decline this holiday by 1.0%. Furniture and home furnishings stores will experience the biggest deterioration reflecting the lagging impact of the housing market on demand. Home improvement store sales also are forecast to decline 1.0% amid persisting weakness in the housing and mortgage markets. Consumer electronics stores are the exception in the channel with holiday sales growth forecast at 4.0%. Sustained buying to prepare for the conversion to digital TV signals could make consumer electronics stores an even stronger holiday performer than expected.
- Online sales across retail channels are forecast to grow 9% this holiday season compared with 19% in 2007. This would be the first single-digit growth rate for online retailing during the holiday shopping season since 1999. TNS Retail Forward forecasts online sales to reach $42.5 billion in the fourth quarter, up $3.5 billion from the prior year.
“The letup in online shopping reflects the spreading impact of the economic downturn since the last holiday season, particularly among upper-income shoppers,” Badillo noted. “These shoppers, who are more likely to shop online, have turned increasingly value-focused in recent months as they have felt worse off with regard to investments, home values and other economic measures.”