Forecast: Recovering sales still translate into grim holiday

Columbus, Ohio Retail Forward released its holiday 2009 forecast on Tuesday that predicted the upcoming holiday shopping season will rank as the second-worst holiday in 42 years.

Even though the market research firm said retail sales during the fourth-quarter holiday period will be on the road to recovery, it forecasts flat growth for the holiday fourth quarter in the key holiday retail segments combined. That compares with a 4.5% decline a year ago.

The holiday segments represent all retailing except the auto, food and drug channels. Included are home improvement stores, catalogs, online sales and the key GAFO retail sectors.

“Softer August retail sales declines are signs of an emerging retail recovery that will be driven by growing confidence among households,” said Frank Badillo, senior economist for Retail Forward.

This is positive news, explained Badillo, as retailers move into the critical holiday season, but the economic environment will remain difficult. “Sales declines will persist for specific retail channels -- particularly apparel and homegoods -- but will end for aggregate measures of retail sales.” 

The slight improvement in the sales growth trend is forecast to gain strength quarter by quarter in 2010, according to Retail Forward. The company expects the retail sector in aggregate to approach long-term average growth rates by the end of 2010.

Apparel and accessory sales are predicted to decline about 2% during the 4Q holiday period, compared with a more than 9% drop last year. Most of the continued decline will be at department stores.

Mass retail, which includes discount department stores, supercenters, warehouse clubs and small-format value stores, is forecast to grow sales 2.5% this holiday season. This is an increase from 2.0% a year ago.

The homegoods channel will see sales decline more than 2% compared with a 7.4% decline last year, according to Retail Forward. Consumer electronics stores will experience the biggest decline in part due to Circuit City’s exit. Building and home improvement retailers will see sales declines ease to -2.0%.  This channel is expected to be the first to benefit from improvements in the housing market and is forecast to see slight sales gains emerge in early 2010.

Retail Forward predicts that online sales across retail channels will grow 4% this holiday season after declining 5% a year ago. It expects the pace of online sales to be sustained into 2010, but remain shy of the double-digit growth the channel saw for several years. “The emerging recovery will be driven by growing confidence among households in response to, among other things, subsiding job cuts by businesses. Businesses, in turn, are taking their foot off the brakes in light of leaner inventories and expectations that pent-up demand and economic stimulus will soon require new business investment,” Badillo said.