Customer Growth Partners - Holiday 2009 Forecast

Craig Johnson, President of Customer Growth Partners and Roulston Research's Consumer community Chair has issued a Holiday 2009 Forecast. Craig believes holiday retail sales will grow by 2.4% y-o-y, a sharp turnaround from last year’s 4.1% decline. In issuing the forecast, Craig noted that his estimate of $502 billion in predicted 2009 November-December sales still lagged the peak $511.1 billion in 2007 sales -- and were barely above the $497.1 billion level seen in 2006.

He believes that Americans have endured a series of economic body blows over the past year, from the housing and credit crises to rising unemployment, but they’re now beginning to pick themselves off the mat, dust themselves off -- and start to shop again. With unemployment near 10%, this will not be a great holiday season, but compared with 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.

Highlights of CGP’s 2009 Holiday forecast include:

• November-December 2009 retail sales will increase to $502 billion, up from $490 billion in the similar period of 2008;
• The 2.4% rise represents a sharp turnaround from 2008’s 4.1% YOY decline;
• 2009 Holiday sales will be paced by 10.8% year-over-year growth in e-commerce and other direct-to-consumer sales, also a strong rebound from last year. According to the DOC, fourth quarter 2008 e-commerce sales fell by 5%, the first ever YOY decline in holiday period e-commerce sales;
• Clothing and accessories sector sales will rise by 8.8%, a major turnaround from 2008’s unprecedented 13% decline -- but still below sales levels achieved in either 2006 or 2007;
• Lagging sectors will include the long-suffering home-improvement retailers, predicted to see a 10.4% YOY decline, and the home-furnishings sector, with a 6.6% drop;
• Discount and other value retailers will shine in holiday 2009, led by off-price retailers such as TJX and Ross Stores, low-price players such as Aeropostale and Forever 21, such Big Boxers as Costco and Wal-Mart, and e-commerce retailers Amazon and Gilt.com;
• Electronics retailers -- from Best Buy and Hhgregg to Apple, Amazon and Wal-Mart -- will see exceptional unit growth, particularly in flat panel TV’s, e-readers, laptops and mobile phones, but will be held back by sharply falling consumer electronics prices;
• The predicted 2.4% holiday season increase represents CGP’s Base Case forecast, which assumes that the unemployment rate remains in the 9.8% to 9.9% range, and that energy prices remain stable at about $2.70/gallon regular gasoline; and
• CGP also prepared two sensitivity analysis forecasts. Under the high unemployment/ high-energy price scenario, holiday sales would decline by 1.5%; and under the falling unemployment/low-energy price scenario, holiday sales would rise by 4.4%.

He notes that last year’s holiday shopping season saw households in almost stark fear financially, as consumers clenched their pursestrings with an increase in the savings rate to 4.7% during the peak December Christmas shopping season, over quadruple the 1.1% savings rate from earlier in 2008. But now savings are now returning to more normalized 3% levels -- and with the third quarter GDP growing at about 2% or 3%, the economic clouds are beginning to lift a bit.

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.