CPG: Strong September sales bode well for holiday; forecasts 5.8% growth

Stellar sales in September should lead the way to a surprisingly strong holiday for retailers.

That’s according to Customer Growth Partners’ 19th annual Holiday Forecast, which predicts a strong 5.8% year-over-year increase in retail sales for the November-December holiday season, to a record $749 billion. (The CPG forecast spans all retail sales except autos, gasoline and restaurants.)

“After the COVID store closures crushed sales by 12% in April, traffic and sales have rebounded ever since, culminating in the blow-out September retail sales data, up 8.8% from 2019,” said Craig Johnson, president, CGP. “After past calamities, the American shopper has shown that she is deeply resilient after even the worst disasters, such as 9-11, and that she will bounce back smartly—as long as her household has a job.”  

E-commerce will again pace holiday sales, with digital and direct-to-consumer sales of $189 billion and representing over 64% of the aggregate increase in holiday sales, according to the forecast. Among major store-based retailers, the great bulk of growth will be from online sales, with most reporting flat or slightly negative in-store sales.

In other findings, the leading merchandise categories, leading sectors will include home improvement (up 8.9%) and sporting goods/toys (up 8.5%). The steepest declines among retail sectors will include apparel (down 13.5%) and department stores (down 11%).

CGP said its above-consensus forecast is grounded on solid consumer fundamentals that include robust 5.4% growth in disposable personal income, bolstered by rising wages and salaries and 11.5 million new jobs created since the April nadir of the COVID recession. Household balance sheets are their healthiest in decades, with the Fed’s Household Debt Service ratio at a record-low 8.7%, and personal savings rates above 14% — more than twice usual levels.

“With an extra $1.24 trillion year-over-year in total household savings, now at $2.43 trillion, shoppers have the equivalent of three full holiday seasons of ‘dry powder’ cash available for spending, far above the entire $749 billion holiday forecast,” Johnson said.

CPG’s holiday spending outlook is tempered by concerns for the millions still unemployed, and by uncertain prospects for additional federal COVID-related aid in the coming weeks. 

“Looking past holiday, the key question is how sustainable retail growth will be going forward, given the unexpected strength of household finances — and the uncertain pace and impacts of COVID, particularly on employment growth,” Johnson said. “But if the economy can generate at least the current monthly rate of 661,000 new jobs—equivalent to about 8 million new jobs per year—retail spending is poised to expand in 2021 somewhere near a healthy 5% pace, buoyed by the strong consumer fundamentals.”