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Fitch Ratings expects modest improvements in retail sales growth in 2014


New York -- Fitch Ratings expects total U.S. retail sales growth in the 4% range in 2014, a modest increase over expected 2013 figures that reflects slight improvement in both the employment rate and real wages.

Fitch expects 2013 holiday sales to grow in the 3%-4% range, in line with The National Retail Federation forecasts that November and December sales will increase 3.9% year over year to $602 billion.

Overall, Fitch is maintaining a stable credit outlook for U.S. retailers in 2014. However, the modest negative tilt to rating activity will continue, given ongoing top-line pressure on some large industry participants.

Fitch expects liquidity to remain strong for most U.S. retailers with solid levels of cash and unused bank lines, most of which do not expire until 2016 or further. Debt maturities for 2014-2015 remain manageable for investment grade retailers. In the high yield segment, most retail issuers took advantage of favorable credit conditions in 2013 to extend maturities well beyond 2015.

There is some potential for LBO or acquisition activity, and debt-financed dividend payments or share buybacks, but Fitch expects the pace to moderate significantly given the strong level of activity in 2013.

Fitch's 2014 sales growth projections assume 2%-3% in same store sales. Store growth is expected to be modest given the overstored profile of the retail industry. Consumer electronic and office furniture store closings will offset some moderate square footage growth in the discount space and ongoing rapid growth in the dollar store segment.

The ability to maintain market share remains a key challenge for many traditional retailers, in view of the strong growth in online sales on top of the continued encroachment by discount formats. Traditional retailers that are willing and capable of investing in a multichannel strategy will continue to drive market share gains at the expense of retailers that struggle to maintain relevance in a mature but dynamic sector.

The full 2014 Outlook: U.S. Retailing is available at

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