Printer-friendly version Reader Comments

Stores are likely to slash prices and offer other promotions to lure holiday shoppers again this year.

By ANDRIA CHENG, McClatchy Newspapers October 13, 2009

NEW YORK — Despite some signs of economic improvement, continued job losses and record-high unemployment will likely translate into the retail industry's first back-to-back holiday-season sales declines on record.

Holiday sales in November and December are expected to decline 1 percent to $437.6 billion, compared with a 3.4 percent drop last year, when the industry saw its worst holiday season on record, according to the National Retail Federation. The industry's 10-year average is a 3.4 percent increase.

Uncertainty over the job market and home values will continue to weigh on consumers' spending decisions this holiday season, the federation said. Retailers, particularly electronics and apparel stores, will likely cut prices and offer promotions to lure shoppers during the industry's most crucial period.

Walmart Stores Inc. last week said it's making more than 100 holiday toys available for $10 each, an expansion of its 10-for-$10 toy program last October, setting the stage for another price-competitive holiday season, analysts said.

The holiday period represents anywhere between 25 percent and 40 percent of the industry's annual sales and is make-or-break for some categories, such as jewelry shops, according to the NRF.

Archstone Consulting, which Monday forecast holiday sales would fall 1 percent after a 2.8 percent decline a year earlier by its calculation, said this holiday season would likely cap the industry's first consecutive declines in 40 years, when the compilation of such retail-sales data began.

In addition to a cloudy job picture, demand has been hurt by a decline in consumer credit and near-record-high savings rate, the consulting firm said.

Faced with forecasts of a tough holiday season, retailers are taking a conservative tack and may opt to keep tight rein on inventory levels this season to avoid the profit-eroding discounts of last year, Archstone said. Inbound cargo, a proxy for retail inventory, is at its lowest level in at least seven years, down about 20 percent from 2007's peak levels, Archstone said.

The two-month holiday period represents anywhere between 25 percent and 40 percent of the retail industry's annual sales.

Not all seasonal industry outlooks are quite so gloomy. The shopping-center trade group International Council of Shopping Centers forecast retailers would see a 1 percent increase in same-store sales in November and December, and it said holiday sales could be up as much as 1.5 percent when factoring in January, marking the industry's best holiday-sales performance in three years. The trade group noted that consumers' mood could be buttressed by the facts that average weekly earnings have risen and jobless claims have declined from their highest levels in more than 26 years.