NEW YORK — Holiday sales will show solid growth, but thanks to high fuel prices, sales this year are expected to be softer than 2003, according to two forecasts.

Deloitte Research’s “The Outlook for Holidays” and Bernard Sands’ “Holiday 2004 Sales Forecast” cited rising crude oil prices as a factor impacting the discretionary spending capability of consumers.

Carl Steidtmann, Deloitte’s chief economist, doesn’t expect this year’s holiday season to reflect the same explosive growth retailers saw in 2003.

“Fewer tax cuts, less home mortgage refinancing and the effect of rising energy prices all combine to make life a little more difficult for the consumer,” Steidtmann said.

The report, which noted that retailers in 2003 benefited from easier year-ago comparisons, indicated that mass merchants will see the pace of sales growth slow as this holiday season approaches while specialty retailers will likely see higher price points on the goods they sell.

“We’ve seen apparel price deflation since 1998, but in the last couple of months we’ve also seen a bit of a turnaround. Retailers have gotten much better control over their inventories and that gives them a bit of pricing power. Consolidation in the industry also contributes to pricing power. The net of that is we should see an environment that is pretty good for profitability, and retailers should get better margin performance,” the economist said.

Steidtmann said much of the deflationary movement in apparel prices stemmed from an explosive growth of goods coming in from China. But he thinks this trend has run its course.

Meanwhile, Steidtmann still sees a lot of momentum in the luxury sector at retail, a segment he feels will continue to be strong.

“The sources of income for high-income households — dividends and from profits — are doing well,” he explained.

Left out in the cold are the lower-income households, which Steidtmann observed feel the impact of rising gasoline prices more directly. The economist equates the increase to a tax hike on these consumers because it reduces the purchasing power of nonoil-related goods.

But while mass market players such as Kohl’s, Target Corp. and Wal-Mart Stores Inc. will see slower growth due to a decline in real-wage income, the bigger loser over holiday will likely be the department store sector.

This story first appeared in the October 13, 2004 issue of WWD. Subscribe Today.

“Department stores have been losing market share for as long as I can remember, and I don’t see that dynamic changing,” he concluded.

The expectation, according to Deloitte Research, is for sales of apparel specialty retailers and mass merchants to rise 6 percent during the holiday selling season.

In his report, Richard Hastings, retail analyst at Bernard Sands, said he expects heating bills in the key Northeast U.S. region to soar and hurt discretionary spending. This hit on consumers’ wallets, plus lack of wage growth for some, will erode their spending power just in time for the holidays, he concluded.

Hastings predicts holiday sales to grow by 4.75 to 5.25 percent, against a 7.6 percent jump last year. Same-store sales for chain stores will be between 2.5 and 3 percent, he said, noting that comps growth has been declining for the four months going into October 2004.

He noted the weakness in demand for fashion, footwear and accessories as one factor contributing to fewer holiday sales. In addition, he expects gift cards to cut into December’s store sales — although it would help the post-Dec. 26 spending period — and for online retail sales to climb by as much as 35 to 45 percent compared with last year.

Hastings noted that the length of the holiday shopping season is being redefined. Some sales start as early as mid-September as a pre-holiday tickler, even though most view Halloween as the kickoff.

The end of January is generally seen as the end of the season. However, when including gift card redemptions, the season could be extended — and not by weeks, but months, he concluded.

The good news, Hastings added, is though top-line growth rates will decline, there will be less of a need for markdowns prior to Dec. 25, which will boost profitability.

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