Study: A Silver Lining Amid Gloomy Holiday Outlook

New York–Some retail segments may find a silver lining this holiday season, according to Deloitte Research. Although a study by the company predicts that holiday retail spending will decline about 1% this year, compared to a 3.1% increase last year, “shrewd” retailers could achieve better gross margins than last year. Inventories are under much better control this year than last, noted Deloitte, and many retailers are entering the season with modest sales plans and spending less on promotional efforts.

The study claims another silver lining can be found in a much-needed cap on retail expansion that is expect for next year. Because industry profitability is expected to decrease 20% from a year ago, and higher operating costs for workers, energy and real estate will offset gains in gross margins, retailers may rein in their expansion plans, positioning them for better profitability when consumer spending does recover. In fact, Deloitte anticipates that the U.S. recession will last until early 2002.

Among other findings, the study says that the apparel category is positioned for a particularly disappointing season as a result of a lack of fashion direction coupled with a better-than-average holiday last year. What’s more, household wealth shrank last year for the first time since the government began collecting data in 1945.

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