A man wearing a sanitary mask takes photos during the Dolce & Gabbana women's Fall Winter 2020-21 show, in Milan, Italy, . After Giorgio Armani's last-minute decision to show his latest collection in an empty theater due to concerns about the new virus, the rest of Milan's runway shows scheduled for Sunday are to go ahead as planned, fashion officials confirmedFashion F/W 20/21 Dolce & Gabbana, Milan, Italy - 23 Feb 2020

There are high hopes for the U.S. retail industry to generate healthy sales gains this year — that is, if the coronavirus doesn’t erupt further.

On Wednesday, the National Retail Federation forecast that retail sales during 2020 will increase between 3.5 percent and 4.1 percent to more than $3.9 trillion. Still, the NRF cautioned its forecast assumes the coronavirus does not become a global pandemic. If it does, business confidence and retail sales could be impacted by continuing factory shutdowns in China, stalled back-to-school and holiday merchandise deliveries, and consumers staying home to avoid getting ill.

NRF figures include online sales, which are expected to grow between 12 percent and 15 percent to between $870.6 billion and $893.9 billion. The figures exclude automobile dealers, gasoline stations and restaurants.

Customer Growth Partners, the research and consulting firm, predicts retail sales rising 4.1 percent, but only 2.2 percent if the virus persists for long. Earlier this month, Moody’s, the ratings and financial services agency, forecast 3.5 percent retail sales growth for the year.

The experts based their positive outlooks on the nation’s healthy household financials; continued job, wage and GDP growth; declining gasoline prices; utility costs for natural gas, as well as low unemployment and low inflation. Spending was up 4.7 percent in the November-December reporting period, the NRF said.

Yet, the optimism is dampened by concerns that the coronavirus isn’t contained. Federal health officials warned this week it will most likely spread in the U.S., and that schools, hospitals and businesses must be prepared.

On Wall Street, many retail and fashion stocks continued to fall Wednesday even as the broader market stabilized somewhat following a two-day rout that was sparked by fresh outbreaks, including one in Italy that disrupted Milan Fashion Week over the weekend.

The Dow Jones Industrial Average fell 123.77 points, or 0.5 percent, to 26,957.59 — marking a decline of 7 percent for the week so far.

Leading the fashion and retail stocks lower were companies that offered up disappointing quarterly reports and also detailed the impact of the coronavirus on their businesses, including Fossil Group Inc., down 21.5 percent to $4.17, and Revolve Group, 13.1 percent to $16.78.

But many other players in the industry were simply hit hard as investors reassessed the risks in their stock portfolios. Among the decliners were Ascena Retail Group Inc., down 12.1 percent to $4.21; Signet Jewelers Ltd., 11.3 percent to $22.74; Tailored Brands Inc., 9.4 percent to $3.26; Guess Inc., 7.9 percent to $16.69; Macy’s Inc., 6.9 percent to $13.59; Hanesbrands Inc., 5.6 percent to $12.67; Abercrombie & Fitch Co., 5.5 percent to $13.70, and Levi Strauss & Co., 5.4 percent to $17.78.

Stock markets in Asia also fell, but most of the European markets bounced back some, led by the FTSE MIB in Milan, which rose 1.4 percent to 23,422.54.

Many luxury stocks, which have been particularly hard hit given the sector’s reliance on China for sales growth, were also gaining back some ground. Among the companies showing market advances were Salvatore Ferragamo, up 2 percent to 14.89 euros; Moncler, 1.6 percent to 35.70 euros; Brunello Cucinelli, 1.5 percent to 30.88 euros; LVMH Moët Hennessy Louis Vuitton, 1.4 percent to 385.25 euros, and Kering, 1.1 percent to 530 euros.

The coronavirus outbreak began in late January in Wuhan city in the Hubei Province of China and has spread to more than 30 nations.

Some retailers and brands are already taking precautions, including the Neiman Marcus Group. “We have made the request to a handful of associates — less than 10 — traveling back from Milan to follow the Center for Disease Control’s recommendation and work from home for 14 days following their return date,” a NMG spokesman told WWD on Wednesday. “Should they feel any of the reported symptoms of the virus, we have encouraged them to visit their primary-care physician and not return to work until they have been cleared by their doctor. This is for their own safety as well as the safety of all our associates.”

A spokeswoman for Hearst Magazines said, “Hearst Magazines employees returning to the U.S. from China, Iran, Italy, Japan and South Korea will work from home for 14 days, before returning to the office. And they must be symptom-free after that period.”

“[Outside the U.S.] thousands of people have been affected and several thousand have passed away. We want to be respectful of that,” Matthew Shay, NRF president and chief executive officer, said Wednesday, when the organization released its 2020 forecast.

Recent conversations with retail executives and NRF board members have focused on the “cascading affects” of the epidemic in China on supply and logistics, Shay said. While health and business concerns grow, “what we are seeing coming out of China is generally encouraging news,” Shay said. “Plants are coming back on line. Workers are going back to work. Disruption appears to be less severe than originally expected.”

Shay cited a “great emphasis overseas on increased efficiencies over the last number of years, spurred by trade policies and imposition of tariffs. That emphasis has accelerated the diversification of production away from China.…There is a general sense that at the moment, [retailers] are in a good place due to creative work with suppliers about the availability of goods. We see positive signs from China that the supply chain is working its way back to full capacity.”

On Tuesday, Macy’s Inc. chairman and ceo Jeffrey Gennette, said the virus will have a small impact on first-quarter sales and that less than 50 percent of Macy’s private brands come from China. With products shipped from China, “We have seen a slowdown but nothing concerning yet,” he said.

“We have 70 stores with a strong Asian customer base, like in Flushing [in Queens, N.Y.] or Union Square [in San Francisco] where we have seen some slowdown in sales but nothing to be concerned about yet,” Gennette said.

Gennette did say the coronavirus situation is “unfolding,” and that Macy’s is monitoring the situation and working with brands to mitigate the impact on product availability.

“While the depth and length of the spread of the disease in the U.S. are highly uncertain, it is entirely possible that impacts will be felt both by retailers due to supply chain dislocations, and by consumers — as they alter their shopping patterns,” said CGP founder Craig Johnson. “To date, CGP’s field team has seen no changes in consumer behavior except for shortages in directly related goods such as face masks, and some increases in hand disinfectant purchases.”

CGP predicts $3.852 trillion in 2020 retail sales, up from $3.699 trillion in 2019, when retail sales increased 3.8 percent. Online sales are seen growing at a double-digit pace, and are poised to account for 56 percent of the total year-over-year dollar growth, far outpacing brick-and-mortar retailers.

Aside from the virus, another wildcard potentially impacting retailing is the presidential campaign and political divisiveness across the U.S., though Shay believes there shouldn’t be much political fallout on retailers. “Consumers have the ability to process the information and political debates. They’re not going to have a negative impact on consumer behavior and consumption.” American consumers, Shay, said, “can separate the wheat from the chaff.”

He did raise the possibility of a post-election fallout on businesses. New leadership could advocate for policy changes, which might worry businesses.

NRF’s chief economist Jack Kleinhenz said, in terms of consumer spending, “there is not a consistent trend going back over time in the years of an election and the following year. But as it gets closer to Election Day and holiday, it becomes difficult for retailers to get adequate media time.”

Kleinhenz said that in 2016 when Donald Trump was elected president, retail was up 3.1 percent that year, and in 2017, retail rose 3.8 percent. “You got to believe it’s the fundamentals of the economy,” Kleinhenz said.

“The nation’s record-long economic expansion is continuing and consumers remain the drivers of that expansion,” Shay said. “With gains in household income and wealth, lower interest rates and strong consumer confidence, we expect another healthy year ahead. There are always wild cards we cannot control things like coronavirus and a politically charged election year. But when it comes to the fundamentals, our economy is sound and consumers continue to lead the way.”

NRF expects the overall economy to gain between 150,000 and 170,000 jobs a month in 2020, compared with an average 175,000 in 2019, and that unemployment — currently at 3.6 percent — should stay around 3.5 percent. Gross domestic product is likely to grow 1.9 percent, down from preliminary estimates of 2.3 percent in 2019.

“The economy is growing at a more modest pace, but the underlying economic fundamentals remain in place and are positive,” Kleinhenz said. “Consumers remain upbeat and have the confidence to spend, and the steady wage growth that has come with the strong job market is fueling their spending. The state of the consumer is very healthy.”

Preliminary results show that 2019 retail sales grew 3.7 percent over 2018 to $3.79 trillion.

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