E&Y Holiday Sales Forecast Offers Generally Positive Outlook

Ernst & Young LLP has released its annual holiday sales forecast, which largely bears out the most recent figures from the National Retail Federation: Retailers can expect a 6% increase in sales over Nov./Dec. last year. The continuing rise of energy prices and stalled job creation and personal income are factors working against sales increases. The Forecast also mentions the “gift card effect,” which means that gift card sales are not redeemed until January, reducing holiday sales figures. Retailers eager to get a jump on the holidays have promoted much in advance of the traditional season, which might lower sales in November and December. The two extra shopping days provided by this year’s calendar “could have a positive or negative effect on margins.”

Despite being “poised for growth,” the U.S. economy is also struggling with cautious low-to-mid-income consumers, possibly deflationary product categories (toys, consumer electronics, apparel), a West Coast shipping blockage that has slowed distribution, and the possibility that a drop in equity markets might cause the upscale consumers who are expected to drive the season’s retail success to reduce spending also.

Internet sales are expected to continue gains of 15%–20% this holiday season; gift cards will continue to be popular (one survey claims 64% of the population got or gave a gift card already this year). Apparel is expected to be deflationary, with customized apparel expected to be selling well; toy retailing, on the other hand, has suffered from a variety of issues this past year, there are no “hot” toys on the scene, and children are using electronic devices at ever-earlier ages. The Red Sox first World Series win in practically a century is expected to produce significant sales in licensed apparel, and for some reason, “poker supplies—chips, cards—will be very popular.”

Major metropolitan areas including New York, Boston, Philadelphia, and Los Angeles will see sales at or a little below the national forecast; Chicago sales will likely be below the forecast, and San Francisco and Atlanta, both with improved unemployment rates, should have sales above the forecast.

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