US Retail off to Good, Not Great, Holiday Season

The day after Thanksgiving is known in the retail trade as “Black Friday,” but unlike black days on Wall Street, it is a good day. It is the day holiday sales start, and many retailers move into the black, or at least, they can see profitability from where they are on that day. This year, the early evidence points to a good holiday season for retailers, but the results so far don’t suggest that this year is going to break any records.

The National Retail Federation, and a great many industry analysts, says that the conditions for a great season just aren’t there. Last year, consumers had their tax rebates to spend (as per Mr. Bush’s desires), and oil prices hadn’t exploded to current levels yet. However, the job situation for all but the lowest income levels is slightly more secure this year. Expectations are that sales will rise around 4.5% from last year to something like $220 billion. Last year, by way of comparison, sales rose by 5.1%.

At the Wal-Mart end of the sales spectrum, the world’s largest retailer is reducing its November sales forecast. An increase of 2-4% was what most were expecting from last year, but the increase seems to be only 0.7%. Foot traffic is down form what was expected, largely because Wal-Mart doesn’t have much room to discount prices this time of year. Other discounters have found much the same situation. Those with less disposable income, those who tend to shop Wal-Mart by necessity, haven’t got as much with gas at $2.25 per gallon in many places.

However, Sharper Image and the up-market department stores should see their luxury goods fly off the shelves. The rich are doing better and are feeling more secure than last year. If one can afford a Hummer and fill its gas tank, what’s a few thousand more or less at the mall for the holidays?

The one factor that won’t turn up just yet is the success of on-line retail this year. This shopping reduces foot traffic measures of economic activity, and very few online sales for the holidays have occurred yet. Growth here is expected to be substantial, but precisely how it plays out won’t be known for a couple of weeks yet. All the same, for retailers, a good, but not great, season beats a lousy one.


© Copyright 2004 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.


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