NRF sees 2009 U.S. holiday retail sales falling 1 percent

SAN FRANCISCO Tue Oct 6, 2009 12:38am EDT

Related Topics

SAN FRANCISCO (Reuters) - U.S. holiday retail sales could fall for the second year in a row as rising unemployment and stagnant wage growth curb gift buying, according to a forecast released on Tuesday by a top industry trade group.

The National Retail Federation expects 2009 U.S. holiday sales, or retail industry sales in the months of November and December, to fall 1 percent this year to $437.6 billion. Last year, sales in the period fell 3.4 percent to $441.97 billion.

If the decline materializes, it would mark the first back-to-back drop since the group began tracking such figures in 1992, something NRF Chief Economist Rosalind Wells called "unprecedented."

"There's a lot of weakness in the consumer sector because of the employment situation, because there's no income growth and so consumer confidence is, I would say, wavering," Wells told Reuters in an interview.

The unemployment rate now stands at a 26-year high of 9.8 percent, and that figure is "just not going to look better in the near term," Wells said.

That will pressure holiday sales, she said, despite signs that the U.S. economy started to grow in the third quarter after four quarters of contraction.

RECOVERING FROM DISMAL 2008?

The year-end holiday shopping season is a critical one for retailers, and can account for 25 percent to 40 percent of full-year sales. The 2008 holiday was a disaster for retailers, as a financial crisis swept across the globe in September and consumers cut spending on nearly everything but bare necessities.

Faced with bulging racks of unsold merchandise, many retailers resorted to slashing prices 70 percent to 80 percent last year, undermining both four-quarter sales and profits.

Since then, retailers ranging from Wal-Mart Stores Inc (WMT.N) to Liz Claiborne Inc LIZ.N have pointed to a "new normal" that has emerged in which shoppers focus on the basics, spend selectively, and shun unnecessary splurges.

Early estimates for the 2009 holiday season have mainly called for sales to be flat to down compared with last year's depressed levels, although the forecasts often use different metrics to measure holiday sales.

In one of the more bullish forecasts, the International Council of Shopping Centers said the 2009 season should be "a lot better" than 2008, and it expects sales at stores open at least a year in November and December to rise 1 percent.

The NRF's Wells said the 1 percent decline in holiday sales would mark an improvement from the 3 percent drop expected for 2009 annual retail industry sales. She also said retailers have protected themselves by stocking less inventory this year, expecting consumer demand to remain muted.

"Retailers have been experiencing very weak sales all year," she said. "They're not expecting any great sales this Christmas."

Discount retailers, warehouse club operators and online retailers are the best positioned for the holiday sales season, she said, while retailers that sell housing related merchandise will struggle.

(Reporting by Nicole Maestri; Editing by Michele Gershberg)

FILED UNDER: