U.S. retailers may see more moderate sales gains this holiday season as persistently high unemployment and steeper gasoline and grocery prices prompt shoppers to think twice about spending, according to early forecasts.
Retail sales are expected to rise 3 percent in November and December, a slower pace than the 4.1 percent gains in 2010 and barely more than inflation, research firm ShopperTrak said on Wednesday.
The International Council of Shopping Centers suggested that sales at U.S. shopping centers would rise just 2.2 percent, to $449 billion, after a 5 percent increase in 2010. Kantar Retail, which includes online sales in its forecast, said it expects growth of 2.8 percent, half last year's rate.
ShopperTrak, which measures foot traffic to stores, said people will head out with a set list of what to buy and spend less time browsing.
"People are going to the malls and the stores less frequently, but when they go there, they know what they're after," ShopperTrak Chief Executive Christopher Ainsley told Reuters.
That means retailers will have fewer chances to turn browsers into buyers and will be under pressure to offer attractive selections, better in-store presentations and more targeted customer loyalty programs, Ainsley said.
It could also mean less impulse buying.
Foot traffic is expected to slip 2.2 percent as high gasoline prices prompt fewer shopping trips, ShopperTrak forecast.
Retailers are already girding for battle with each other this fall, especially chains whose shoppers are particularly vulnerable to the economy's mood swings.
Kohl's Corp's (KSS.N) sales were unexpectedly weak in August and the department store chain plans to boost advertising and "sharpen" its prices this fall.
Target Corp (TGT.N) Chief Financial Officer Doug Scovanner said at a conference this month that the discount chain has to compete "vigorously this holiday season for our fair share."
J.C. Penney Co Inc Chief Executive Myron Ullman said at that same conference: "We have pulled back a bit in terms of our expectations."
MAKE IT OR BREAK IT
The holiday season can make or break a company's annual results, accounting for one-third of annual sales in many cases. Last year, according to the National Retail Federation, U.S. holiday sales reached $462 billion, up 5.7 percent over 2009, raising hopes the economic recovery was on solid footing.
But unemployment has barely budged since then and consumer confidence has fallen to its lowest in a generation.
A survey for Reuters this month by America's Research Group found that 27 percent of Americans plan to spend less this holiday season, while 55 percent plan to spend the same.
Still, no one is expecting a bloodbath at the malls.
Global Hunter Securities analyst Richard Hastings said back-to-school sales have tracked close to the firm's forecasts and retailers understand the state of the economy and have planned accordingly, being careful about building inventory.
Ullman said at the conference that Penney had planned for a better year but that his chain was keeping a tight lid on inventory, lest Penney find itself forced to offer bigger discounts than planned and lose gross margin if shoppers do not show up.
ShopperTrak estimates that sales of clothing and accessories will rise 2.7 percent and that lower-end chains will have to offer bargains to compete with discounters.
Shares of Macy's (M.N) and VF Corp, (VFC.N) parent of Nautica and The North Face, were each down 2.4 percent in afternoon trading, while Wal-Mart's (WMT.N) shares slipped 1 percent.
High-end stores such as Saks Inc SKS.N and Nordstrom Inc (JWN.N) will continue to have an advantage over their more affordable peers Penney and Kohl's.
Sales of electronics will lag other holiday gift categories, rising only 1.2 percent, largely because of the limited number of blockbuster electronic gadgets that will be offered this year, ShopperTrak predicted.
ShopperTrak, which gathers data at 25,000 stores in the United States, does not include online sales, restaurants, automobiles or gasoline in its data.
(Reporting by Phil Wahba in New York, additional reporting by Jessica Wohl in Chicago; Editing by Derek Caney, Maureen Bavdek and Steve Orlofsky)