It’s only September, but inflatable Santa decorations were already on display at a newly opened Wal-Mart store here this week as U.S. retailers try to jump-start what looks to be a decent but unspectacular holiday shopping season.
Falling gasoline prices have lower-priced chains feeling pretty good about the all-important November-December shopping period, but a wobbly housing sector will likely hold back sales at stores that sell big-ticket items such as furniture.
Most industry watchers think holiday sales growth will be more modest than last year’s surprisingly strong 6.1 percent gain, constrained by weakness in the housing market.
The holiday season accounts for more than 25 percent of annual retail sales, and the bulk of the year’s profits for gift outlets such as jewelry stores.
With the economy showing signs of slowing, Wall Street is watching holiday sales particularly closely this year for clues on the health of the consumer. Consumer spending accounts for some two-thirds of U.S. economic activity.
“Back-to-school spending came in fairly strong and Halloween spending is expected to be up, and we believe these will be bellwethers for holiday spending,” said Pat Conroy, vice chairman and national managing principal of consultant Deloitte Touche’s Consumer Business practice.
Conroy said consumers have proved resilient this year in the face of steep energy prices, slow job growth and softness in the housing market, and should get an end-of-year boost from recent declines in gasoline prices and growth in real disposable income.
Consumer confidence also seems to be rising at just the right time for retailers. The Conference Board said on Tuesday that its index of U.S. consumer confidence rose more sharply than expected in September as energy costs fell and job prospects brightened slightly.
For the first time in several years, toy retailers have a legitimate “hot” toy in T.M.X. Elmo that should drive customers into stores, but limited supplies may prove frustrating for shoppers and retailers alike.
Flat-panel televisions will remain a top seller as prices drop dramatically, and mass merchants including Wal-Mart Stores Inc. stock a wider assortment of name-brand models.
But big-ticket items, particularly furniture, may be a tough sell as homeowners fret over declining property values.
“Housing is going to be a very, very difficult situation for retailers to deal with,” said retail consultant Kurt Barnard. “It is going to spoil what might otherwise have been a so-so holiday sales year.”
Discounters such as Wal-Mart and Target Corp. are likely to be the big winners because they cater to lower-income shoppers, who were hit especially hard by steep energy prices and will wield more spending power now that oil has retreated.
Department stores are likely to lag once again as mass retailers add more fashionable merchandise to attract more customers, Retail Forward’s senior economist Frank Badillo said.
