Retail sales expected to climb as much as 4.4 percent in 2018

Key Points
  • The National Retail Federation projects industry sales could climb as much as 4.4 percent in 2018.
  • Online and other non-store sales could rise as much as 12 percent.
  • Retailers are largely expected to reap the benefits from new tax legislation.
A shopper carries a bag from Designer Shoe Warehouse on August 13, 2014 in San Francisco, Calif.
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U.S. retail sales in 2018 could climb slightly higher than last year's 3.9 percent gain, as lower unemployment and growing wages drive consumer confidence higher.

The National Retail Federation on Thursday projected industry sales will grow between 3.8 and 4.4 percent this year, excluding automobiles, gas stations and restaurants. That compares with NRF's forecast last year of growth between 3.2 and 3.8 percent. A jump of 4.4 percent would be the biggest increase since 2011, when retail sales climbed 5 percent.

Online and other non-store sales, which are included in NRF's total projections, are expected to increase between 10 and 12 percent. That incorporates sales made from mall kiosks, catalogs and vending machines.

"A robust holiday season for retail sales is just one of many barometers that points to a consumer that is clearly feeling positive about their financial health," NRF President and CEO Matthew Shay said.

"Despite headlines to the contrary, the retail industry is strong, growing and meeting consumer demand with the products they want at the prices they expect and the shopping experience they want to have, online or in store," he added.

NRF's annual forecast follows an encouraging holiday season for many retailers. Department stores and a slew of specialty brands ended 2017 on a high note when compared with the year prior. Recent earnings reports from names such as Tapestry and Michael Kors have also been upbeat.

"The push and pull of forces both external and internal to the U.S. economy will continue to provide challenges, but on balance we expect a good year," NRF Chief Economist Jack Kleinhenz said.

Companies are also still announcing plans for how they will use anticipated savings from new tax legislation. Bonuses, wage hikes and sweetened benefits are being offered to some part- and full-time retail employees already, but the start of 2018 has also brought news of store closures and job cuts across the U.S.

"Macroeconomic conditions are highly favorable toward consumer spending with low unemployment, modest wage gains, tax cuts, rising home values, record levels of consumer net worth and elevated consumer confidence levels," said Ken Perkins, the founder of Retail Metrics, in a note to clients this week.

To be sure, many companies "still face the need for heavy investments in logistics and last mile spend, in inventory management, in employees, in the introduction of AI & AR to their stores and ecommerce platforms, in differentiation initiatives among other needs that will weigh on profitability."

Read the full report from The National Retail Federation.