By  on November 19, 2010

With just a week to go before Black Friday, the holiday prognosis is looking up.

Comp-store gains from 2 to 4 percent are widely predicted. A flurry of surveys from market research firms suggest consumers are less uptight about spending — maybe because retailers say they are prepared to promote as heavily or even heavier than last year, if that can be imagined.

In a string of retail results for the third quarter released this week, almost all companies raised guidance, with some bullishly predicting a strong holiday. Target Corp. said its fourth quarter will be the best of any quarter in the last three years, and even Wal-Mart Stores Inc., which has been struggling with negative domestic sales through this year and an uneven apparel business, is expected by analysts to come out positive for holiday. At the other end of the price spectrum, Angela Ahrendts, chief executive officer of Burberry, said unequivocally that “the luxury sector is back.”

Among the factors cited by industry executives as fueling the new consumer enthusiasm are:

• A generally higher stock market.

• Some signs of economic recovery, even though unemployment remains high.

• Retailers’ promotion-driven attitude.

• Retailers are offering more merchandise at the lower tier of their price structure, or as they prefer to say, presenting “a greater range” of products and prices for holiday.

Not long ago, retailers were depressed about business, frustrated with the economy’s slow recovery and ready for another draggy holiday season. However, “After everybody reported October comps, after the election, and after the weather got colder, there was cause for some optimism. There’s a more business-friendly environment with less uncertainty,” said ITG Investment Research’s softline retail analyst Chandi Neubauer. Still, “Christmas is really going to be driven by promotions, lots of pricing competition, and creativity — more social media, especially in teen space.” The season “might be a little better than people are thinking.”

“Retailers are working against a little bit of a low bar, and consumers are a little tired of being puritanical and feeling more flush after paying down debt,” said Alison Paul, vice chairman, Deloitte. “They haven’t spent any money in a while.” The “new necessities” like smartphones and e-books are driving some business, as well, she added. While the Internet and earlier promotions will eat into Black Friday business, “the promise of those really hot Black Friday offers or promotions — everybody knows they are limited,” Paul said.

According to Deloitte research, gift cards, clothing, computer games and smartphones rank as top gift choices this year. Households earning $100,000 and more are leading the upswing in consumer sentiment and plan to spend 77 percent more on gifts than the average. Gen-Yers plan to spend 50 percent more than the average on nongift holiday items. Also, 37 percent of this group cite careful spending throughout the year as a reason they’re hoping to spend more on the holidays. However, Boomers are most likely to spend less on the holidays [46 percent] and feel their financial situations have worsened.

According to Fiona Dias, executive vice president of strategy and marketing for GSI Commerce, free shipping will dominate retailer promotions on the Web, Black Friday deals are being unleashed earlier this year online and offline with steep discounts, and mobile shopping will be key. “Expect a slew of mobile apps to emerge that let consumers shop on the go,” Dias said.

Other analysts noted that Commerce Department figures citing October retail gains in different sectors and the stock market holding at over 11,000 have also bolstered expectations. So did a flurry of surveys released this month. According to a national consumer poll commissioned by the International Council of Shopping Centers and Goldman Sachs, 31 percent of households plan to shop on Black Friday in 2010 compared with 26 percent in 2009. “With consumers further behind on their holiday shopping than in recent years, Black Friday shopping will likely be intense this year, as consumers shop for bargains to complete their gift lists,” Michael P. Niemira, chief economist and director of research for ICSC, said. “However, Black Friday also continues to be an opportunity for consumers to buy for themselves, as our survey found that consumers expect that about three-quarters of their Black Friday purchases will be on nonholiday items for themselves or their families, rather than gifts,” Niemira added.

To unlock this article, subscribe to WWD below.

load comments
blog comments powered by Disqus