RetailSails

Last week, we wrote that modest gains were expected for retail sales in 2010 based on projections from a couple of research firms. Since then, several analysts have weighed in with their own forecasts of what to expect. The consensus is that there will be notable improvement from what can only be characterized as a dismal 2009, but performance will still lag pre-recession averages and be heavily dependent on real improvements in employment and housing markets, and consumers’ personal finances:

Retail Forward: forecasts retail sales excluding auto and gas will increase 1.5% to 2.0% in the first two quarters of the year and step up to 3.0% to 4.0% growth in the second half of the year as job and income growth start to re-emerge.

“The first clear sign that retail sales are on the path to recovery came during the holiday,” Frank Badillo, Senior Economist for Retail Forward, a Kantar Retail Company. “Keeping retail sales on this recovery path will require—more than anything—a return of job and income growth. Renewed job and income growth will ultimately outweigh other drags on the recovery, such as tighter credit availability and new credit regulation.

In addition, looming large in 2010 will be rising inflation pressures—starting with fuel prices—that ultimately lead to higher interest rates. This will present a challenge for the housing and homegoods markets, which will continue to lag in a retail sales recovery led by other retail segments.

As we head into 2010, non-store and online sales will remain strong as shoppers continue to shift demand for consumer electronics and other categories online. Also leading growth will be apparel stores, particularly off-mall value specialty stores, and small-ticket discretionary categories. Value-focused mass retailers will also hold up well, including supercenters and warehouse clubs.”

National Retail Federation (NRF): projecting retail industry sales (which exclude automobiles, gas stations, and restaurants) will increase 2.5% from last year, when sales fell 2.5%.

“As we continue to see signs of improvement throughout the U.S economy in 2010, overall sentiment will begin to lift, making way for slight increases in consumer spending,” said NRF Chief Economist Rosalind Wells. “While we still expect shoppers to continue to be frugal with their discretionary spending, retailers will soon be able to reap the benefits of leaner, smarter inventories and a year and a half of pent up consumer demand.”

• housing market and employment are beginning to show positive signs, which will bolster consumer confidence throughout the year.
• Other positive economic contributions will come from trade, especially strong exports, a turnaround in the inventory cycle, and federal government spending. Consumer spending will lag behind overall economic growth, Wells estimates, but will continue to expand at a modest 2.0 – 2.5% rate.

ShopperTrak: predicts an increase in foot traffic of 1.8% and a gain in retail sales of 1.2% for the 1st quarter of 2010, compared to declines of 13.0% in traffic and 4.2% in sales a year ago.

“While we don’t anticipate anything extraordinary over the first three months in 2010, the fact that our data initially points to a Q1 retail traffic increase is something retailers should pay close attention to as traffic is typically a great indicator of future sales performance,” said Bill Martin, co-founder of ShopperTrak. “Although the potential traffic numbers are relatively encouraging, we’re comparing to a very slow traffic period in ’09 and at this point don’t anticipate any major sales or traffic increases in Q2 as the retail industry continues to shake off the cobwebs from 2009.”

International Council of Shopping Centers (ICSC): expects a 3.9% gain in shopping center-related sales growth, following a 2.4% drop in 2009.

• “Although ICSC does not expect sales, anytime soon, to rival the past boom spending years—when sales grew in the 5‐6% range—the 2010 expectation is one marked by improvement in all segments of the industry as the recovery continues to gain steam. Let the recovery roll on!”

Moody’s Economy.com: expects retail sales to rise 3-4% in 2010.

• Mark Zandi, chief economist of Moody’s Economy.com said “The economy is looking measurably better than a year ago, and it will be measurably better a year from now,”
• consumers still have a lot of debt to pay down before they can ramp up their shopping again and banks are willing to lend again. “Most of the drag of the credit crunch is now,” Zandi said. “Once consumers deleverage in two years, spending will pick up.”
• improving sales trends in 2010 would prompt U.S. retailers to begin hiring more employees
• U.S. retailers would have to sell more products to emerging markets to sustain their growth