Retail

NRF calls for 3.7% holiday sales growth

Holiday sales expected to rise 3.7% this year: NRF CEO
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Holiday sales expected to rise 3.7% this year: NRF CEO

All those deals that consumers that have come to love — and in many cases, expect — are taking a toll on the industry's holiday spending projections.

Jack Kleinhenz, chief economist of the National Retail Federation, said Thursday that deflation in the retail sector is one reason the trade group expects holiday sales to increase 3.7 percent this year. That would mark a deceleration from last year's 4.1 percent growth.

As retailers continue to compete on price, Kleinhenz said they have to sell more to achieve the same level of sales gains. The holiday season is already shaping up to be competitive, with Wal-Mart launching its layaway program two weeks early, and Target expanding its price-match guarantee.

The arrival of European competitor Primark is expected to put even more pressure on retailers' pricing strategies. On a tour of the company's new Boston store, Guggenheim Securities analyst Howard Tubin said he saw a pair of skinny jeans selling for $7.

"It becomes a challenging environment," Kleinhenz said.

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Aside from deflation, the NRF listed slower job growth and a shift away from spending on traditional goods as other headwinds. But NRF CEO Matthew Shay emphasized that retailers can "still win in this market, you've just got to do things right."

"I think the recognition is that consumers... will spend when they're presented with the right product at the right price," Shay said.

The NRF forecast falls in line with several other industry predictions calling for low- to mid-single-digit growth.

The trade organization predicted sales in November and December will reach $630.7 billion, rising at a rate that's "significantly higher than the 10-year average of 2.5 percent."

Still, that pace would fall short of last year's results.

"Similar to last year in the sense we're coming off a rather disappointing first half, this holiday season brings to light several crosscurrents that still exist for American households," Kleinhenz said in a press release.

"While confidence data is encouraging, slower job growth in 2015, deflationary retail prices and the mix of consumer spending somewhat shifting toward big-ticket items and services, as well as the wild card in our government spending debates, will all contribute to the slower growth rate of sales expected for the holiday season."

The NRF also said it expects online sales to rise between 6 and 8 percent, to as much as $105 billion. That's in line with last year's performance, when the group said nonstore sales grew 6.8 percent.

In July, the National Retail Federation lowered its annual sales forecast to 3.5 percent growth from 4.1 percent, citing unexpected slowness in the first half. At the time, the trade group said it expected sales to grow at a more positive pace of 3.7 percent over the next five months.

NRF's holiday sales forecast considers economic indicators including consumer credit, disposable personal income and previous monthly retail sales releases. It excludes autos, gas and restaurant sales.

Among other industry forecasts for this holiday season, ShopperTrak is calling for 2.4 percent growth; AlixPartners predicts sales will rise between 2.8 and 3.4 percent; and Deloitte is predicting a gain of between 3.5 and 4 percent.