I have started #Christmas Shopping!

Reading Holiday Tea Leaves

Forecasters Predict Higher Sales This Christmas; Retailers Say Flexibility is Key

Predicting how strong or weak holiday sales will be is a time-honored tradition, but it is far from an exact science.

Prominent forecasters over the past eight years have regularly overshot or underestimated actual results by a percentage point or more. Predictions for this year’s holiday shopping are beginning to come in, and, for now, modest gains are expected, but economic certainty evaporated in the last recession.

The discrepancies between forecasts and reality underscore the tricky balancing act retailers have to perform to avoid being stuck with unsold gear if consumers prove cautious or, alternatively, missing out on crucial sales in a two-month period when many retailers book 25% to 40% of their annual sales.

Market-research firm ShopperTrak Corp. expects that sales in November and December will rise at a slower rate than a year ago — a 3% increase versus last year’s 3.7% gain. (ShopperTrak counts foot traffic using 50,000 cameras mounted on retailers’ ceilings, blends it with data provided by stores and takes account of macroeconomic trends to make its forecast.)

Meanwhile, a survey of 14 retailers conducted in August by management consultancy Hay Group found three out of four expect a better holiday than last year, and that many will hire more seasonal help as a result.

Last year, actual holiday sales were stronger than some of the predictions. ShopperTrak and the International Council of Shopping Centers expected a 3% gain, while the National Retail Federation predicted a 2.8% increase. But according to the government figures tallied after the selling period ended, sales had risen 3.7% from the previous year’s holiday results.

In general this year, retailers remain cautious amid a wobbly economic recovery that is easily susceptible to shocks, whether from gasoline prices or stock-market swings.

Chain stores are keeping inventories relatively lean and some say they are planning earlier sales to test which products catch on, so that there is time to reorder for the peak season around Christmas.

Jones Group Inc., the parent company of brands such as Nine West, Rachel Roy and Anne Klein, has been monitoring August and September sales closely to spot early hot sellers, President Richard Dickson said. For instance, the company has noticed consumers buying up flat boots.

“How consumers react to these early shipments is a great indicator of how they’ll spend in the fourth quarter,” said Mr. Dickson. Jones expects sales to be up modestly over last year. “We’re gaining more and more confidence it will be a good holiday season,” Mr. Dickson said.

Retail experts say retailers have gotten better at planning inventory in general, chasing hot items when necessary and cutting off shipments of products that don’t sell. Hay Group’s study found nearly a third of retailers expect to run promotions in October compared with about a fifth a year ago. Craig Rowley, vice president of Hay Group’s retail practice, said the earlier discounts are a way for the companies to see what is selling and what isn’t, so they can fine-tune the inventory going forward.

Ascena Retail Group Inc., the parent company for Dressbarn, Justice, Maurices and Lane Bryant stores, expects its holiday sales to be up at least modestly but it is looking for early reads on bestsellers. The company also has planned out promotions for the season, but remains flexible in order to add more if they are needed, said David Jaffe, chief executive of Ascena.

“I’m looking forward to getting past the election so there’s certainty and less of a distraction to the consumer,” he added.

In the U.S., retail patterns have been uncertain since the recession, with consumers turning out for the holidays and even into the New Year but fading in the spring. Back-to-school sales were unexpectedly strong, but retailers are unsure that trend will carry into Christmas.

The culprit is the slow recovery. While the heavy job losses of the downturn have ceased, employment gains have been slow. The U.S. added just 96,000 jobs in August. That leaves 12.5 million people still out of work and the rest keeping a close eye on their own jobs.

Volatile gasoline prices and the coming presidential election are adding to the uncertainty this year, said Bill Martin, executive vice president at ShopperTrak.

Hay Group’s survey found that 30% of responding retailers plan to hire more seasonal workers this year. Only 10% of stores said they were increasing holiday staffers a year ago.

“What jumped out at me the most is how upbeat retailers are for Christmas,” the Hay Group’s Mr. Rowley said. “Most are expecting to see sales and hiring up. Had you asked me in July what I thought, I would have expected them to be more conservative.”

Zale Corp., the jewelry store chain that does 35% of its business during the holidays, expects sales to be better than last year, but only modestly so.

“With the election and 8.1% unemployment, people will still be cautious,” said Matt Appel, Zale’s chief administrative officer.

(Source: The Wall Street Journal, 09/12/12)

Author: alisonsawhill

Marketing and Advertising Manager, 20+ years of success, working with clients on a local, regional and national level. Experienced in strategy, development and execution of clients marketing plans using all media tools, including Radio, Internet, Social Media, Events and Promotions.

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