Retail forecast mixed for holiday shopping

10/7/2010

But some retail analysts are less upbeat.

The Washington-based trade association expects holiday retail sales to reach $447 billion this year, up 2.3 percent from last year. The association said the numbers are a considerable improvement from a holiday sales gain of 0.4 percent in 2009 and a sales decline of 3.9 percent in 2008.

While shoppers may spend more this year, the economy has made people more conservative about opening their wallets, said Jack Kleinhenz, chief economist with the trade group. He expects stores will offer more sales and gifts with lower price points to get shoppers in the buying mood.

"Retailers have to convince consumers that the recession is over and they need to buy accordingly," Mr. Kleinhenz said.

Cheryl Schmidt, owner of Taste of Toledo Gift Baskets and Gifts in Holland, said she's cautiously optimistic about this year's holidays, but she doesn't have any predictions for sales.

Her store had a "moderate" sales increase in 2009 compared with 2008 holiday sales, and she hopes Taste of Toledo can repeat that growth.

"With the economy the way it is, I can't really have any expectations again this year," Mrs. Schmidt said.

Some retail analysts, though, are not as optimistic about sales projections for the holidays.

George Rosenbaum, co-founder of Leo J. Shapiro & Associates in Chicago, called the retail federation's projections "ambitious," saying he expects consumer spending to increase 1 percent to 1.5 percent this year.

"The odds are that people will be a little more generous, but only slightly so, than last Christmas," he said.

Burt Flickinger III, managing director of the Strategic Resource Group in New York City, expects holiday sales to increase about 1.7 percent. However, if the sales are adjusted for inflation, he expects them to fall by 0.5 percent to 1 percent this year.

Inflation has increased, in part, he said, because of higher freight costs, rising manufacturing costs in foreign countries such as China, and higher prices for such commodities as cotton, sugar, and leather. Mr. Flickinger said these factors will increase prices for consumer goods, which means total holiday sales will appear artificially higher compared to 2009.

Though the recent recession may be over, holiday shopping likely will be tempered by people's uncertainty about the economy and their finances, he said.

"Consumers are scared," Mr. Flickinger said. "They're just spending on essentials, and they're saving instead of doing any discretionary spending or unplanned purchasing."

Mr. Rosenbaum said consumers will spend money on children's gifts, "useful" presents that can be used repeatedly, and "small treats"

- items that are viewed as slightly indulgent, but reasonably priced.

"Even with a full recovery, which is not so near in sight, we may never go back to the lavish spending that we've had some years for Christmas," Mr. Rosenbaum said.

Jack Schatzley, president of Schatzley's Diamond & Jewelry Design Studio in Ottawa Hills, expects his store to buck the expectations. He projects a holiday sales increase of 20 percent, compared to the same period last year.

The increased business, he said, is expected to come from repeat customers and new shoppers who want custom-designed jewelry. He's also noticed five or six customers who have begun buying gifts now to prepare for the holiday season.

"Our customers usually don't start buying until early December," Mr. Schatzley said.

The National Retail Federation's holiday sales projections come on the heels of its Halloween spending forecast, which predicted a nearly 18 percent increase in consumer spending this fall.

Mr. Flickinger and Mr. Rosenbaum said Halloween sales tend not to correlate with trends in holiday spending.

Contact Sheena Harrison at:

sharrison@theblade.com

or 419-724-6103.