Kantar Retail: Holiday forecast mixed

Columbus, Ohio Retail sales for the fourth quarter holiday period will be significantly better than a year ago, according to Kantar Retail. However, the holiday will feel weak, compared with the relatively strong pace of retail sales growth in the first three quarters -- a pace inflated temporarily by economic stimulus and pent-up demand.

Kantar Retail forecasts growth of 2.5% -- compared with 0.5% growth in 2009 -- for the holiday fourth quarter in the key holiday retail segments combined. (The holiday segments represent all retailing except the auto, food and drug channels.)

“Prices and uncertainty will weigh heavily on the holiday outlook,” said Frank Badillo, senior economist for Kantar Retail. “Ongoing price competition among retailers, led by Walmart, is more likely to take a toll on sales gains than boost unit demand among shoppers who remain value conscious.”

Kantar expects shopper demand to remain modest as job and income gains remain constrained by reluctance among firms to invest and hire amid an uncertain outlook. The firm projects that small-format value retailers, including dollar stores, will rank among the strongest holiday performers.

The uncertain environment is also weighing on holiday spending intentions, according to Kantar Retail’s ShopperScape survey.

“ShopperScape results indicate that cautious shoppers who are hanging onto deal-seeking tactics from the recession and are still cautious about spending create a backdrop for a highly promotional holiday season,” comments Mandy Putnam, VP, Kantar Retail and director of ShopperScape. “Getting shoppers to loosen the clench on their wallets will largely depend on how well retailers align promotions to when and where key shopper groups are shopping this holiday season.”

The soft sales growth Kantar Retail expects should continue into the first half of 2011.This does not, however, portend an economy slipping into a double dip recession. The softness reflects the tough prior-year comparison periods that will make it difficult to generate strong year-to-year growth --particularly for homegoods retailers.