A merry Christmas after all

Now that November is here the holiday shopping season has officially begun, at least for purposes of sales forecasting. And those gloomy and negative holiday forecasts that came out a month ago have given way to a new round of more upbeat predictions that actually envision growth. The most recent one comes from accounting and consulting firm BDO Seidman, which projects holiday sales will increase by 2.6%. The growth forecast is based on a survey of chief marketing officers at leading retailers who were almost unanimous in their agreement that this season will see a higher level of discounts and promotions than the prior year, even though inventory levels are well below the prior year.

“While some chief marketing officers have expressed optimism, unemployment is still a major concern and a majority of retailers are planning more discounts and promotions than last year,” said Doug Hart, a partner in BDO Seidman’s retail and consumer practice. “However, retailers’ inventories are leaner going into the 2009 holidays. As a result, we can expect less panic this year. Discounting will likely be moderate and more strategic than the deals we saw last year.”

Slightly less optimistic than BDO Seidman is the firm Customer Growth Partners, which projects a 2.4% holiday season gain.

“With unemployment near 10%, this will not be a great Holiday season, but compared to last year when the economy was in freefall, retailers will see a return of topline growth and many will enjoy robust, if not record, fourth quarter earnings,” said Craig Johnson, president of Customer Growth Partners.

Johnson cautions that the projected 2.4% increase is by no means a sure thing, “and the the real wildcards will be if employment takes another leg down, and if energy prices take another leg up, which will turn Holiday sales negative a second year in a row.”

A third firm out with a recent upbeat forecast is PricewaterhouseCoopers subsidiary Karabus Management which forecast sales will be flat to up 1%. Retailers are better prepared this year and have reduced costs and managed inventories appropriately.

“While unemployment and the credit crisis will have a continued impact through the holiday season, people are tired of the gloom and doom,” said Michael Unger, managing director of Karabus’ performance improvement practice. “Consumer sentiment remains low but has spiked relative to recent months with retail therapy poised to make a come back.”