The prognosticators were out in force over the last few weeks, making their predictions for the upcoming Holiday selling season. While most reports mention the obvious influence of higher gas prices, rising interest rates, and the Iraq war, none acknowledge the shift in consumer purchasing habits that SEW feels were partly responsible for the delay and ultimate weakness of the Back-to-School selling season.

The National Retail Federation is now forecasting 4.5% Holiday retail sales growth and sees gains challenged by a 5.1% gain in the year-ago period. NRF is estimating Holiday sales at $219 billion for this year, or nearly 23% of total retail sales for the year. Last year, the NRF had projected a 5.7% increase in Holiday sales.

Meanwhile, the Ernst & Young LLP Americas Retail and Consumer Products Group is forecasting that the 2004 Holiday retail sales increase for November and December will be in the 6% to 7% range, compared to a 5.7% increase for the same period last year. E&Y again sees apparel and consumer electronics as the two of the best-performing segments. They also expect Internet sales and gift cards will continue to grow.

Both forecasts cited strong first half growth and moderate gains in July and August.

“Although consumer spending has been inconsistent in recent months, we expect the holiday season to bring more stability to the industry,” said NRF Chief Economist Rosalind Wells.

Gift cards could again have an impact on the sales numbers as consumers load up on the easy-to-give cards that allow the recipient the opportunity to purchase what they want. Unfortunately, the purchases usually happen after Christmas and at clearance sale prices, which has pushed more sales into January and cuts into margins. Revenues from gift card sales are not recognized until the cards are redeemed.

Once downside here is the calendar, as retailers see two less post-Chistmas days in their December retail sales period this year. Since Christmas falls on a Saturday, we may see fewer people take the whole week off prior to Christmas day this year, resulting in more pressure on the weekend before Xmas. Still, we expect that sales will come as late as consumers can hold out.

“My guess is the season will come late, will be frenzied, but it will happen,” said Todd Slater, retail analyst at Lazard LLC, in a Wall Street Journal article.

The key to retail success this year will once again depend on who wins the battle of will – the retailer or the consumer. Tighter inventories and a willingness to hold price will clearly benefit the retailer, but weaker sales coming out of the weekend before Xmas day could lead to sharp markdowns for five days before the big day.