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NRF Projects 4.1% Holiday Boost

Improving consumer confidence will trump the effects of lingering employment woes and propel retailers to an increase in sales.

Improving consumer confidence will trump the effects of lingering employment woes and the uncertain risks of the “fiscal cliff” and propel retailers to a 4.1 percent increase in holiday sales.

This story first appeared in the October 2, 2012 issue of WWD.  Subscribe Today.

That’s the initial forecast for the season from the National Retail Federation, to be released today by the Washington, D.C.-based trade association. The projection is higher than NRF’s final forecast for a 3.8 percent gain in 2011 holiday sales, a figure which proved overly conservative when sales for the season grew 5.6 percent to $563.02 billion. NRF last year initially projected a 2.8 percent sales increase but in December elevated the number a full point based on the strength of Black Friday weekend and other results early in the season. Sales for holiday 2010 hit $533.39 billion, 5.5 percent over the prior-year period.

“This is the highest pre-holiday number we’ve issued since the recession,” Matthew Shay, president and chief executive officer of NRF, told WWD, “but it’s not as big as last year’s actual number. And we can safely say that if the [Obama] administration and Congress were showing the kind of leadership they should be in addressing the fiscal concerns that are causing consumers to hold back, the number could be quite a bit higher. The biggest distraction is the election, but the biggest risk is the threat of the ‘fiscal cliff’ if it’s not addressed in an adult manner.”

Jack Kleinhenz, chief economist at NRF, said, “There’s still some general anxiety amongst consumers when it comes to how the state of the economy is impacting their spending plans, but retailers can expect to see excitement around their promotions and plenty of bargain hunters both online and in stores in the coming months.”

ShopperTrak, the Chicago-based firm that monitors retail traffic and transactions, previously estimated that sales for the critical November-December period would increase 3.3 percent over the 2011 level, with apparel and accessories expected to grow a stronger 4 percent.

NRF also projected, through its Shop.org digital division, that online sales would grow 12 percent over the holiday 2011 level this year, reaching between $92 billion and $96 billion. That estimate, the first ever made by NRF about online sales, is incorporated into the overall NRF forecast. It compares with 15 percent growth in online sales in 2011, according to Commerce Department data.

According to NRF, retailers are expected to hire between 585,000 and 625,000 seasonal workers this holiday season, which is comparable to the 607,000 seasonal employees they hired last year. On Monday, Macy’s Inc. said its holiday hiring would rise about 2.5 percent this year to about 80,000 from about 78,000 last year. Previously, Wal-Mart Stores Inc., Target Corp. and Kohl’s Corp. had said they would take on more seasonal workers than they did a year ago.

In the equity markets Monday, signs of strengthening in the U.S. manufacturing sector — including those among apparel and textile producers — helped lift stocks on both sides of the Atlantic.

The Dow Jones Industrial Average rose 0.6 percent, or 77.98 points, to 13,515.11 while the S&P 500 Retailing Industry Group advanced 0.2 percent, or 1.21 points, to 656.67. Major gains were registered by Coldwater Creek Inc., up 17.5 percent to 98 cents following an upgrade to “overweight” from “neutral” by Piper Jaffray, and The Bon-Ton Stores Inc., up 8.8 percent to $10.34 but well below the 52-week high of $14.99 reached on Sept. 12.

U.S. manufacturing activity expanded for the first time in four months in September, according to the Institute of Supply Management. The group’s Purchasing Managers’ Index, or PMI, rose to 51.5 for last month, up from 49.6 in August. A reading over 50 percent indicates growth in manufacturing. Of 11 production sectors seeing growth, textile mills were the strongest and makers of apparel, leather and allied products rated fifth.

Backlogs, however, were down in September and employment in the sector fell, ISM said. And apparel producers said their customers’ inventories were too high.

European stocks rose more vigorously than their U.S. counterparts, with the FTSE MIB in Milan as the strongest market, gaining 2.8 percent to 15,523.10, followed by the CAC 40 in Paris, which climbed 2.4 percent to 3,434.98. The DAX in Frankfurt expanded 1.5 percent to 7,326.73 and the FTSE 100 in London gained 1.4 percent to 5,820.45.