Kantar Retail forecast holiday retail sales will grow 2.5% but the growth will feel weak compared with the relatively strong pace of retail sales growth in the first three quarters – a pace inflated temporarily by economic stimulus and pent-up demand.

Kantar Retail forecasts growth of 2.5% compared with 0.5% growth in 2009 for the holiday fourth quarter in the key holiday retail segments combined.

The holiday segments represent all retailing except the auto, food and drug channels.  Included are home improvement stores, catalogs, online sales and the key retail sectors where many holiday gifts are traditionally purchased, such as conventional and discount department stores; supercenters and warehouse clubs; apparel stores; and furniture, home furnishings, consumer electronics and other specialty stores.

“Prices and uncertainty will weigh heavily on the holiday outlook,” comments Frank Badillo, senior economist for Kantar Retail.  “Ongoing price competition among retailers, led by Walmart, is more likely to take a toll on sales gains than boost unit demand among shoppers who remain value conscious,” he adds. 

We expect shopper demand to remain modest as job and income gains remain constrained by reluctance among firms to invest and hire amid an uncertain outlook.  If that uncertainty turns to confidence in the weeks ahead, however, then holiday sales could climb more than forecast, he states.

The uncertain environment is also weighing on holiday spending intentions, according to Kantar Retail's ShopperScape survey.   ShopperScape results indicate that cautious shoppers who are hanging onto deal-seeking tactics from the recession and are still cautious about spending create a backdrop for a highly promotional holiday season,” comments Mandy Putnam, VP with Kantar Retail and director of ShopperScape.  “Getting shoppers to loosen the clench on their wallets will largely depend on how well retailers align promotions to when and where key shopper groups are shopping this holiday season,” she adds.

The soft sales growth Kantar Retail expects should continue into the first half of 2011.  This does not, however, portend an economy slipping into a double-dip recession.  The softness reflects the tough prior-year comparison periods that will make it difficult to generate strong year-to-year growth – particularly for homegoods retailers.  As uncertainty subsides, growth is expected to accelerate into the second half of 2011.

Holiday Retail Sales Results* (Fourth Quarter Year-over-Year Growth)

19998.2%
20003.9%
20012.2%
20022.8%
20036.0%
20046.8%
20057.0%
20063.2%
20072.3%
2008-4.9%
20090.50

*For GAFO, Home Improvement and Non-Store Retail Lines of Trade; Reflects latest revisions 
Sources:  U.S. Department of Commerce and Kantar Retail

Anticipated key retail sector holiday sales performance: 

Sales at apparel and accessories channels are expected to grow slightly during the fourth quarter holiday period compared with a decline a year ago.  Apparel specialty stores will lead the gains.  Conventional and national department stores will lag slightly. 

Mass retailers, including discount department stores, supercenters, warehouse clubs, and small-format value stores, are forecast to grow about the same as last year.  Small-format value retailers, including dollar stores, will remain among the strongest holiday performers.  Supercenters, warehouse clubs, and discount department stores combined will grow about the same as last year.
 
“Non-store and online retailers will experience strong growth this holiday season. Online sales have been growing at double-digit rates recently due to a strong demand for e-book readers, e-books, smart phones, and other consumer electronics,” states Badillo. “This demand can be difficult to predict and represents a wildcard in our forecast.”