Off-price, online, health/beauty stores to pace strong holiday rebound

American consumers will generate an accelerating 4.1% year-over-year increase in 2016 holiday sales, well exceeding 2015’s tepid 3.6% growth.



That’s according to Customer Growth Partners’ 16th Annual Holiday Forecast, which finds that retail sales for the November-December Holiday period will reach $632 billion — a new record, as the above-consensus 4.1% pace reflects rising incomes and the beneficial tailwind of deflation in food prices, apparel and electronics. [CGP’s holiday forecast excludes autos/auto parts, gasoline fuel oil, and restaurants).



“Consumers remain cautious, shop close-to-need and focus on value — but retail spending is now gathering momentum, and is about to unleash years of pent-up demand,” said Craig Johnson, president, Consumer Growth Partners, a retail and consulting firm. “Holiday 2016 is poised to turn out better than many expect—and may well turn out to be a lot better. After a long slow spell, retailers may finally have some real holiday cheer, to cheer about.”



Key findings of the survey include:



• Health and beauty stores, ranging from CVS and GNC to beauty specialist Ulta, will pace all other merchandise categories with year-over-year growth of 7.4%.



• Online and other direct-to-consumer sales, accelerating from last year’s already strong pace, will grow 13.9% year over year, and will comprise more than 17% of total holiday spending.



• Outerwear sales are flat with this fall’s warm weather, but apparel will see robust unit growth approaching 4% — though deflation will hold dollar sales growth to a weak 1.5%. Key fashion trends this year include bomber jackets, long sweaters and wraps, denim — enjoying its best season in years — and footwear, whether booties or long boots.



• Home-related categories will again shine, boosted by the ongoing — if choppy — housing recovery, and led by the home Improvement sector with growth of 5.7%.



• Most department stores, including luxury stores, will struggle again this year, declining by over 2% year over year, beset by sluggish mall traffic and a value proposition far less relevant to millennials than to their parents — or grandparents.



• After a poor year for luxury, at least “hard” luxury such as high-end jewelry may see a late-season rebound.



• Consumer electronics will rebound with robust unit volume growth and newness from wearable technology and the new VR gear for videogames — but rampant price compression in TVs will turn total sales growth 1.7% negative.



“After years in hibernation, retail spending first ticked up in autos a while ago, and new cars saw record sales last year — but they’ve had their day in the sun,” said Johnson. “It’s now time for spending to return to merchandise retail — in-store or online.



CGP maintains an 18-member field team that conducts primary consumer research and detailed store checks in over 90 major shopping venues nationwide. CGP’s bottom-up and top-down forecast methodology draws on the many thousands of datapoints for 50 major retailers collected weekly in these store checks, customer exit interviews and an econometric model validated and refined since 2001.