NRF Forecasts 5% Growth in Holiday Retail Sales

September 23, 2005

NRF Forecasts 5% Growth in Holiday Retail Sales

On the heels of the strongest holiday season in five years in 2004, retailers can expect moderate holiday sales growth this year. According to the National Retail Federation, total holiday retail sales are expected to increase 5% over last year, bringing holiday spending to $435.3 billion. In comparison, holiday sales in 2004 rose 6.7% to $414.7 billion.

NRF defines "holiday retail sales" as retail industry sales which occur in the months of November and December. Retail industry sales include most traditional retail categories including discounters, department stores, grocery stores, and specialty stores, and exclude sales at automotive dealers, gas stations, and restaurants.

"A combination of many factors, including energy prices, the job market, disposable income, and consumer confidence, will ultimately affect retailers' sales this holiday season," says NRF Chief Economist Rosalind Wells. "Though it might be easy to label gas prices as the make-or-break factor for the holidays, it is crucial for analysts to look at the big picture instead of isolating one economic indicator to project sales."

One-fifth of retail industry sales (19.9%) occur during the holiday season, making it the most important time period of the year for the industry. This year, retailers will struggle with tough comparisons over 2004, which will make significant gains more difficult to achieve. In addition, the effects of Hurricane Katrina and high prices at gas pumps play a role in the tempered outlook. However, NRF maintains that steady consumer spending and strong second- and third-quarter gains indicate potential for a solid holiday season.

"Consumers won1t have to wait until the last minute to get the best deals this year because retailers are expected to be aggressive in their pricing strategies throughout the entire holiday season," says NRF President and CEO Tracy Mullin. "Stores are planning for holiday sales and promotions, so discounted prices won1t have a negative effect on profits."

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