Healthy holiday forecast bodes well for 4Q sales - Christmas shopping and effect on fourth quarter 1999 retail revenues

Discount Store News, Nov 8, 1999

NEW YORK -- This year's hyped holiday season, poised to be the best one this decade--and possibly even the century--will give retailers a sturdy spine to take them into the new millennium.

With more venues than ever to sell their wares--particularly the Internet, which this holiday is booming with sites selling everything from Christmas trees to holiday vacation packages--analysts are telling retailers they can expect to enjoy one of their healthiest selling seasons yet.

And all this optimism still thrives despite the fact that retail sales are actually slowing because of interest rate hikes, stock market fluctuations and severe weather conditions in some major markets of the United States.

"Alan Greenspan can scare the heck out of a lot of people, but the truth is that people are working," said Joe Ettore, ceo of Ames and chairman of the board for the International Mass Retailing Association, during IMRA's annual holiday forecast conference. "People have more disposable income than ever."

IMRA, the National Retail Federation as well as many number-crunching Wall Street analysts released their projections for this holiday, and the consensus was consistent.

Here is a summary of what they anticipate:

* IMRA predicts a 5% to 6% increase overall in sales, projecting that consumers will spend an average of $840 this year on holiday-related gifts.

* The NRF and its Holiday Mood Survey partner, Deloitte and Touche, expect robust spending this holiday season with sales gains of 6.0% to 6.5%. They attribute this "bang" in part to the close of the millennium and to the surge of e-commerce this year.

* Jupiter Communications, an Internet research firm, predicts that this holiday will generate $6 billion in on-line sales, almost doubling last year's $3.1 billion total; Jupiter also predicts that the average number of daily transactions the top e-commerce retailers process during November and December will increase almost four-fold to 58,000 during January through October.

* The Michigan Retailers Association with the Federal Reserve Bank of Chicago concluded, from the results of their annual Michigan Retail Index, that three out of four retailers expect to increase sales, with an average gain of 11% over Last year's performance.

* A Christmas Sales Outlook report compiled by Merrill Lynch analysts of retailing and hard lines reveals that higher levels of mortgage refinancings, which have pumped more money into the economy, are a major factor in the strengthening consumer purchasing power this holiday. The reports predicts an increase this year in sales to 5.5% over last year's 5.0%.

Even though Old Man Winter hasn't arrived, weather already has caused many headaches for retailers this year. Regionally, month-to-month sales in the Northeast suffered--showing no increase--due to hurricanes in September. Sales in the Midwest were down 0.6%, in part due to extreme heat. But in the South and the West, where fewer extremes in weather occurred, sales increased by 0.5 and 0.3, respectively, the NRF reported.

Daniel Barry, Merrill Lynch managing director and senior retail analyst, gave his holiday forecast review at his company's annual holiday retail forecast conference, held this year in late October in New York.

Like many of his colleagues, he expects a strong holiday spending season. But "that's not the real story here," he told a modest audience of industry analysts, executives and the press.

"The real story is that retailers are going to experience a hangover in the first quarter of next year," Barry said. "I'm not quite as optimistic on retail stocks this year as I was this same time last year because profits are down. And from the looks of this room, a lot of other people feel just as I do. Last year this room was full of people; this year only a few people showed up."

Of the bricks-and-mortar retailers that Barry expects will be successful, discounters--especially Target--are at the top of his list. "Target, for one, is doing extraordinarily well on the East Coast, and they will have an especially good Christmas if they manage to have the inventory to fit the demand," he said.

However, Barry does not expect e-commerce to be a significant part of this holiday. "The Internet will make up less than half of 1% of total sales," he said. "It will be no contest--bricks-and-mortar retailers will be the winners this holiday and pure play e-commerce will lose big."

Jupiter Communications strongly disagrees. Aside from its on-line sales projections, Jupiter expects the top Web retailers today to fare the best this holiday. At the top of its list are Dell and Amazon. After them, said Jupiter analyst Ken Cassar, comes a "wide gulf of other great sites," including barnesandnoble.com, gap.com, landsend.com, eddiebauer.com and gateway.com.

"Two to three years ago, we at Jupiter thought e-commerce would be the 'sweet spot' of the Internet," Cassar said. "Our thinking has evolved, and we now believe that the retailer of the future is a multiple-channel retailer."