Fitch sees tepid retail recovery in 2010

By Phil Wahba NEW YORK, Nov 16 (Reuters) - U.S. retailers will get a reprieve in 2010, but are not likely to see a robust recovery next year, with unemployment and consumer debt still high, according to a report by Fitch Ratings. The agency, which rates companies' debt, forecast a slow economic recovery would prevent any meaningful turnaround in retail sales in the near future. Fitch is due to release its retail report on Wednesday. "We need to see macroeconomic factors such as unemployment and consumer debt or anything that could impair consumption, improve," Monica Aggarwal, a Fitch director, told Reuters ahead of the release. Fitch expects unemployment to peak at 10.5 percent sometime in 2010. Still, the recent struggles of U.S. retailers will allow the stronger chains to consolidate and even pick up market share at the expense of weaker companies, Aggarwal said. For example, electronics retailer Best Buy Co Inc could see sales rise only modestly in 2010, with strong demand offset by "fierce" price competition, but it will benefit from the disappearance of rivals and see profits buoyed by its new store growth, the report said. Department stores such as Kohl's Corp, J.C. Penney Co Inc and Macy's Inc have recently performed well, with inventory levels "well-aligned to sales expectations," meaning they are unlikely to have to slash prices to lure shoppers as they did in 2008. While the pressure to offer steep discounts has eased, retailers will have to be patient before they see consumers spend enthusiastically again. Fitch anticipates that department stores sales will fall by 2 percent to 3 percent in 2010. U.S. retailers' cash positions will continue to improve as they improve control inventory and continue to slash costs, although the Fitch directors cautioned retailers are running out of ways to cut costs. (Reporting by Phil Wahba; editing by Andre Grenon) Keywords: FITCH/OUTLOOK ([e-mail] [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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