Holiday Sales Might Exceed Forecasts

Many holiday 2014 retail prognosticators got it wrong, but for once erred on the side of caution.
The Department of Commerce will report preliminary December retail sales and adjusted November results on Wednesday. And the early word from retailers, service companies and trade groups this week indicated the season was stronger than many expected. The drop in fuel prices played a critical role in liberating consumer spending, even if increases in food prices constrained it to a degree.

ShopperTrak, the Chicago-based store and mall traffic and sales monitoring company, had projected a 3.8 percent increase for the November-December period.

However, its report on the season, released Friday, indicated that brick-and-mortar GAFO — general merchandise, apparel and accessories, furniture and furnishings and other merchandise associated with department stores — sales climbed 4.6 percent over the level of 2013, to $270.1 billion. November was up 5.4 percent to $120.2 billion, and December climbed 4 percent to $149.9 billion.

“We’re typically fairly conservative with our numbers,” said Bill Martin, founder. “We made a change in our models this year, but holiday simply outperformed everyone’s expectations.”

Customer Growth Partners, which had offered more conservative forecasts than most in recent years and come out closer to actual results, underestimated sales for the season. In October, it projected holiday sales would grow a “mediocre” 3.4 percent, to $590 billion, in the categories on which it focuses, which include e-commerce transactions. It expects that sales for the season will come out $3 billion higher, representing a 3.9 percent year-over-year increase. That would be the best since a 5.1 percent increase in 2011 but “still lag the 6 to 7 percent growth rates routinely seen in the early and mid-2000s,” said Craig Johnson, president of the New Canaan, Conn.-based research and analysis firm.

“Our best-case scenario assumed a 5 percent drop in gas prices, but instead they fell 25 percent, to free up a lot more purchasing, even with inflation in food running higher than expected,” he told WWD. “Increases have moved up, but it’s been from mediocre to modest, and apparel is at the center of an earthquake.”
Citing recent store-closure announcements by Macy’s Inc., J.C. Penney Co. Inc. and PVH Corp.’s Izod brand, as well as bankruptcies at Delia’s Inc. and Deb Shops, he still sees “persistent, widespread overcapacity. Retail square footage has continued to expand, even though apparel will probably be just 2.8 percent of household spending in 2014,” down from 5 percent as recently as 2000.

AlixPartners is sticking with its predicted range of a 3.2 to 3.8 percent increase for the season, although it is leaning toward the higher end of that range.

“December finished stronger for many retailers, driven by lower gas prices, higher overall consumer confidence, aggressive promotions and better weather versus last year,” noted Noam Paransky, a director in Alix’s retail practice.

The most visible of all the holiday prognostication came from the National Retail Federation, which said on Oct. 7 that it expected sales to move up 4.1 percent to $616.9 billion for the season, better than the 3.1 percent registered last year in the categories it monitors. While NRF is often criticized for “over-projecting” based on the interests of its retail membership, it was assailed this year for an entirely different reason — its report of an 11 percent drop in spending over the Thanksgiving Day weekend, based on a consumer spending survey and disputed as being more negative than actual retail results would support.

ShopperTrak, for one, reported a 0.5 percent decline in sales during Thanksgiving Day and Black Friday, and its figures don’t include e-commerce.