retail

National Retail Federation raises holiday sales forecast

Posted 12/16/11

WASHINGTON - Retail sales in the U.S. holiday shopping season may rise 3.8 percent to a record $469.1 billion, higher than an earlier forecast, helped by strong traffic on Black Friday, the National Retail Federation said.

The trade group previously projected sales in November and December would gain 2.8 percent to $465.6 billion. The 3.8 percent gain would be higher than the 10-year average of 2.6 percent growth and slower than last year’s 5.2 percent increase, the Washington-based group said Thursday in a statement.

U.S. shoppers flocked to malls and websites during Thanksgiving weekend, spending a record $52.4 billion. Consumers took advantage of earlier opening hours and deals at retailers from Wal-Mart Stores Inc. to Toys “R” Us Inc.

“The strong numbers are impossible to ignore and show a certain optimism,” Ellen Davis, an NRF vice president, said in an interview. “There has been a slight uptick in momentum.”

An improving labor market may help sustain the gains in consumer spending, which accounts for about 70 percent of the U.S. economy. Payrolls climbed by 120,000 workers in November and the jobless rate fell to 8.6 percent, the lowest since March 2009.

Still, shoppers are being restrained by political discord in Washington, low housing values and fears that the European debt crisis may trigger a recession in the U.S., Davis said. That’s making them careful to stick to a budget.

“They’re still more cautious than in the past,” she said.

No ‘Fireworks’ Yet

Consumers had about 65 percent of their holiday purchasing done as of the second week of Dec. 11, the International Council of Shopping Centers said this week. That was 1 percentage point higher than at the same weekend a year earlier, the New York-based group said.

Shoppers don’t have much more money to spend and may have used some of their budgets on items for themselves, said Marshal Cohen, chief industry analyst at NPD Group in Port Washington, N.Y.

“One Thanksgiving weekend does not a season make,” Cohen said in a telephone interview. “It’s a little soon to be blowing into the horn and setting off the fireworks.”

Stores’ aggressive discounts and free shipping on orders over the Internet may hurt retailers’ profit margins, especially for those dealing with higher labor and raw-material costs this year, said Poonam Goyal, a Bloomberg Industries analyst.

That already began happening during the third quarter. The average gross margin, or the percentage of sales left after the cost of goods sold, for 43 retail companies in the Standard & Poor’s 500 Index narrowed to 32.2 percent, from 33.1 percent a year earlier, according to data compiled by Bloomberg.

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