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Strong Back-to-School Sales May Make for A Less Jolly Christmas

As folks try to use the back-to-school shopping season as a barometer for the Christmas holiday season, one analyst, who was pretty sharp with his forecast for the 2008 holidays, has issued his preliminary read for the 2009 season.

Global Hunter Securities Consumer Strategist Richard Hastings said he expects holiday sales to be in the range of up 1 percent to down 1 percent from last year's level.

Hastings, who defines the holiday shopping period as sales that occur between November 2009 to January 2010, had predicted in October 2008 that last year's holiday sales would be down between 6 percent and 8 percent. The actual results showed a decline of 7.57 percent, close to the weaker side of his range.

Hastings's view is shaped by his belief that the credit crisis is not over, at least as far as the consumer is concerned.

Not only are consumers busy paying down their debt and conserving their cash for a rainy day, they also may be drained by back-to-school spending.

  • Video: Hastings on the Toys 'R Us Trade-In Program

Take electronics. It's been a bright spot for the back-to-school shopping season, as consumers have snapped up laptop computers and related gear to prep students for the classroom. These big ticket purchases may be shifting some of the spending from the holiday season, Hastings said.

In short, strong back-to-school sales may make for a less jolly holiday for retailers.

One positive note, however, is that price deflation may be less of a concern this holiday period, as many retailers are prepping for weak consumer demand, Hastings said. In fact, there is some evidence that prices are firming up heading into the fall and winter period, according to his research.

As for online shopping, the recent weakness in the category has been consistent with overall trends in the industry. And, consumers continue to visit online shopping sites even if they are still only browsing.

This pattern is consistent with the shift consumers have made toward making more educated purchases. Shoppers are scouring the Internet for deals and then making their purchases armed with information.

According to Hastings, the growth in online continues to be with music and gaming-related items as well as with sites such as Amazon.com.

Dollar stores, which include Family Dollaramong others, maybe another big winner this holiday season, Hastings said. Since prices for many items have been coming down and consumers having been heading more frequently to dollar stores, it's possible this segment could take market share away from other types of retailers.

One threatened segment is clubstores such as Costco Wholesale and BJ's Wholesale.

"Merchandising will determine the final outcome," Hastings said. The main concern appears to be margins, and sales of big ticket items, which have been weak at the clubstores, he said.

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