Log in

Analysts: Holiday Sales Prospects Uncertain

26 Nov, 2003 By: Holly J. Wagner

It's shaping up to be another uncertain holiday season at retail, pitting merchants against each other in price wars that are sure to separate the victors from the vanquished.

Some analysts are pessimistic, especially since Wal-Mart reported slower sales than expected for October.

“The consumer still seems to us to be very cautious and probably will remain so until we see improvement in employment,” Wal-Mart chairman and CEO Lee Scott said on a Nov. 13 analysts call. “I don't think consumer spending is slowing, but I don't see the strength many of you in the investment community appear to see.”

NPD Group is also less than optimistic. The research firm found that “consumer shopping excitement” is tepid, with 68 percent saying they would spend the same amount, 19 percent saying they'd spend less and just 13 percent planning to spend more.

“In the past, consumers were driven to stores early to find hot items and [items] that were hyped as especially difficult to find, which drove purchases of other products as well,” said chief industry analyst Marshal Cohen. “Lately we've seen an absence of retailer-led product crazes, leaving consumers to wonder, ‘Where are the Furbies and Pashmina shawls of years past?’

NPD's household spending projections indicate that households with an income of $25,000 or less will spend $353; those making $25,000 to $44,999 will spend an average of $468; homes making $50,000 to $74,999 will spend $653; while families with incomes of more than $75,000 a year will spend $945. Gallup's mid-November poll indicated that people will spend an average of $734 per household on gifts this year, up $44 from last year, but still less per household than they spent in 1999 and 2000.

That's consistent with Deloitte Research chief economist Carl Steidtmann, who's looking for the “best holiday season of this new millennium” -- which is less ambitious than it might sound. Steidtmann predicted non-automobile sales for the season in the United States will rise 6.5 percent to 7 percent.

Deloitte's 18th annual holiday mood retail survey, which breaks out predictions by region, found that in the Northeast, where holiday spending tends to be highest, 54 percent of people plan to spend the same amount as last year, 34 percent will spend less and 13 percent will spend more. The silver lining for video retailers: 66 percent of shoppers plan to buy DVDs and CDs.

The National Retail Federation predicts $672 in household spending on holiday items this year, and a BancOne analyst sees a bright season, projecting a 6.3 percent increase in November and December spending.

Roper ASW found that the magic number will be $929, up from $853 last year. The firm found that the largest intended purchase category, 71 percent, is books, CDs and movies, besting the clothing category at 65 percent. The firm also sees increasing demand for electronics, with 35 percent of shoppers planning to buy, up from 29 percent last year.

Analysts may be overestimating consumer confidence. Consolidated Credit Counseling Services found that 58 percent of consumers would spend less, with 18 percent of those citing lower household income than last year as a factor. Another factor influencing projections is when consumers plan to shop. Online shoppers tend to spend earlier because they have to wait for deliveries. The brick-and-mortar shopping season is about two weeks longer, but that can make it difficult to forecast the season as a whole.

The Roper poll found that shoppers will wait until the last minute to shop, with 25 percent saying their shopping will end a week before Christmas and 10 percent finishing Christmas Eve. Just 17 percent of respondents plan to wrap it up on Black Friday and 26 percent by Dec. 14. If enough consumers shop late, it forces retailers to drop prices to avoid getting stuck with excess inventory after the New Year.

Add Comment