Retail sales growth for the fourth quarter holiday period will be half of what it was in 2010, Kantar Retail forecasts.  The outlook for the 2011 holiday season is not a matter of whether it will be weak, but rather how weak it will be in the wake of declining consumer and business confidence. 

Kantar Retail forecasts growth of 2.8%-compared with 5.6% in 2010-for the holiday fourth quarter in the key holiday retail segments combined.
The holiday segments represent all retailing except the auto and fuel channels.  Included are home improvement stores, catalogs, online sales and the key retail sectors where 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.
The holiday outlook is, in fact, weaker in unit volume or inflation-adjusted terms.  Volume growth is forecast to be flat for the holiday and is at significant risk of turning negative by year-end or the start of 2012.  “If unit volume or inflation-adjusted growth turns negative for retail sales, it would likely coincide with a recession in the overall economy,” comments Frank Badillo, Senior Economist for Kantar Retail. 
 

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

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011(FC)

3.7%

3.2%

2.6%

5.7%

5.9%

6.3%

4.0%

3.1%

-2.8%

-0.1%

5.6%

2.8%

*For retail sales excluding the auto and fuel channels; Includes the food and drug channels
Sources:  U.S. Department of Commerce and Kantar Retail

The Macroeconomic Context
“While the outlook isn’t negative for all retail sectors, it will be driven by the degree to which declining confidence affects spending decisions, particularly for businesses,” Badillo adds.  In the face of rising uncertainty, Kantar Retail expects firms will hold back on investment and hiring, which will aggravate job and income prospects of households, who in turn will hold back on spending.  “The probability is high that this will lead to another recession unless some positive shock-such as government stimulus-keeps the period of heightened uncertainty short and quickly starts to lift consumer and business confidence,” he adds.
The Shopper Context
The weak outlook and uncertain climate will weigh heavily on holiday spending intentions, according to Kantar Retail’s ShopperScape® survey.  “We expect shoppers' spending intentions to continue to weaken in the months ahead but not necessarily fall off suddenly and dramatically,” notes Badillo.  Despite the weakening spending intention trends, shoppers' outlook for the holiday remains better than it was coming out of the recession in 2009, based on an early read of holiday gift spending plans.  More shoppers plan to spend more vs. last year, fewer plan to spend less, with half of all shoppers planning to spend about the same as last year.

Amount Planning to Spend on Holiday Gifts Compared with Last Year

 

Aug-09

Aug-11

Sample Size

4273

4004

 

 

 

Much/somewhat more

7%

9%

About the same amount

45%

50%

Much/somewhat less

43%

35%

Do not spend on holiday gifts

5%

6%