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Deloitte expects weak holiday sales

9/16/2008

NEW YORK Deloitte's Retail group forecasts holiday sales, excluding motor vehicles and gasoline, to increase 2.5% to 3% during the November-to-January period, less than last year's 3.4% increase, and one of the smallest gains since 1991's 2% uptick.

"Higher energy and food prices are making a dent in consumers' wallets, and the dramatic drop in home mortgage refinancings has dried up a substantial source of discretionary funds," said Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP. "In addition, continued softness in the housing market, rising unemployment claims and a volatile stock market are negatively affecting consumers' perceptions of the economy, their wealth, and their ability to spend. In all, these factors will likely lead to a challenging holiday season."

Stacy Janiak, Deloitte's US Retail leader, noted that retailers need to be more creative and take consumers concerns into account this holiday season.

"Retailers can also take advantage of innovative marketing concepts, such as pop-up stores and an emphasis on 'green.' These creative approaches may resonate with consumers, bring shoppers into stores and attract new customers, thus helping expand a retailer's customer base," said Janiak.

Janiak also commented that retailers appear to be positioned well heading into the holiday season, with low inventory-to-sales ratios and payrolls and other costs that are in check. These measures are particularly important given the extensive promotions expected this holiday season, and will hopefully offset some of the impact on retailers' bottom lines.

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