Stars Aligning for Retailers Just in Time for the Holidays

Nov 17, 2010

Topics: Business, Economy, Retail, Trends

The stars are aligning for retailers going into the holiday shopping season, according to a trove of recent data, forecasts and surveys.

The information shows not only that consumers are likely to increase their holiday spending, but that retailers have enough inventory to take advantage of their renewed appetite.

“Consumers are showing a willingness to spend this season,” said Sucharita Mulpuru, Forrester Research vice president and principal analyst. “And, almost universally, online retailers expect their holiday sales to increase this year over last year, showing industry wide optimism.”

Weather willing, that should benefit the outdoor industry, where sales slowed in the third quarter after a brisk pace in the first half of the year, according to OIA VantagePointTM, the official point-of-sale data provider for the outdoor industry. Unseasonably warm weather slowed apparel and footwear sales in many parts of the country in the last six weeks, but that could work to some retailers’ advantage.

In the Midwest, for instance, many retailers are still waiting on deliveries of product imported from China, where a lack of labor and containers has delayed many shipments, said Brand Werntz of Madison-WI-based Pemba Serves Inc., which reps five outdoor brands.

“In our territory, we are affected by La Niña,” said Werntz. “The weather is very warm so are not getting the turns yet.”

Werntz said he thinks his dealers have plenty of inventory and traffic was growing late last week as forecasts pointed to freezing temperatures and snow.

“Traffic is picking up,” he said.

Here is a rundown of recently released reports:

  • Consumer Sentiment: As predicted, the mid-term elections appear to have significantly improved consumer sentiment just in time for the holidays. The Reuters/Univ. of Michigan preliminary consumer sentiment index rose to 69.3 in November compared to 67.7 the month prior. The reading beat out analysts´ expectations of 69.0 and marks a significant shift from October, when the index remained 4.4 percent below year earlier levels. The index is now nearly 30 points higher than in October, 2009.
  • Retail sales: October retail sales, excluding automobiles, grew 3.3 percent year over year, the strongest pace since April, according to MasterCard Advisors’ Spending Plus, which estimates sales based on aggregate sales activity in the MasterCard payments network and survey based estimates of other payment forms, including cash and check. Even after excluding gasoline, retail sales were up 2.7 percent over October 2009. Apparel, a laggard in the outdoor industry, showed strong growth for the third consecutive month. Geographically, the Mid-Atlantic and South Central regions lead the growth.

    Chief marketing officers (CMOs) at the nation’s largest national retailers ($100 million to $100 billion in annual sales) expect comp store and total holiday sales to grow by 2.83 percent and 3.51 percent respectively, according to a survey by BDO USA, LLP. That compares with expectations of 1.4 percent and 2.6 percent a year earlier. Actual comp stores sales declined 3.9 percent in 2008.

  • Retail Inventory: Sales at a half dozen publicly traded outdoor, cycling and snowsports companies, rose in the high-single to high-teens in the third quarter, indicating significant restocking and growth expectations from retailers.

    More than one third (33 percent) of CMOs surveyed by BDO said their inventory purchases have measurably increased since last year and only 16 percent of retailers are citing a decrease. Nearly 60 percent of mid-market U.S. retailers ($25 million to $1 billion in annual sales) said their current inventory is higher than it was a year ago, according to a survey taken in July and August of 111 C-level executives conducted by Forbes Insight for small business lender CIT. Just 10 percent said it is lower. More than half (57 percent) of respondents expected to stock more inventory, more than two thirds (69 percent) say they will advertise more aggressively and nearly three quarters (72 percent) expected to discount more this holiday season than in 2009.

    The National Retail Federation latest forecast estimates container imports will increase 15 percent this year, indicating significant restocking by retailers.

  • Online Sales: Forrester Research expects online retail sales in the U.S. to resume double-digit growth in November and December. At 16 percent, the 2010 growth rate would be twice the rate in 2009, when online holiday sales grew 8 percent in the wake of the global recession. Online sales actually declined for four consecutive quarters in late 2008 and early 2009.