We are now fifty-eight days from Christmas. In just eleven days, Halloween will be over, leftover candy will disappear from retail shelves and retail windows will be prepped for the Holiday season.
Will Holiday retail sales be Scrooge-like or jolly? The prognosticators believe there will be an abundance of good cheer, but that the Grinch can’t be ignored.
To provide context, overall Holiday sales represent approximately 20% of total annual sales. Importantly, Holiday sales can be more profitable because incremental volume comes without a proportional increase in costs and expenses.
Over the last ten years, Holiday sales have grown at annual average rate of 3.4%. Last year, the patriarch of Holiday forecasting, the National Retail Federation (the “NRF”), predicted a rosy increase of 4.3% to 4.8% over the prior year. Most forecasters had similar bullish predictions. However, the actual increase came in significantly lower at only 2.1% – the lowest gain since the U.S. economy came out of the Great Recession in 2009. Why such a miss? There were two major unexpected factors: the year-end shut down of the federal government and the steep drop in the stock market. This year forecasters have even a longer Holiday wish list of factors they hope to NOT find under the tree.
The NRF merrily predicts that sales during this Holiday season, including Thanksgiving, Black Friday, Small Business Saturday, Cyber Monday, Super Saturday and Christmas (marketers have done a noteworthy job of creating multiple shopping occasions) will grow between 3.8% and 4.2% and total approximately $770 billion. The NRF stated, “Current economic data and the recent momentum of the economy show that we can expect a much stronger Holiday season than last year. Job growth and higher wages mean that there’s more money in families’ pockets so we see both the willingness and ability to spend.” However, the NRF also cautioned, “There are probably very few precedents for this uncertain macroeconomic environment. There’s clearly been a slow down brought on by considerable uncertainty around issues including trade/tariffs, interest rates, global risk factors and political rhetoric.”
Other forecasters are even more optimistic, but also have a list of caveats. AlixPartners predicts that Holiday sales will increase 4.4% to 5.3%. The consulting firm expressed, “While our forecast is bullish, these are unchartered waters. From on-again, off-again tariffs, to a growing chorus concerned about a recession, a looming election and geopolitical uncertainty, this season is unlike any other in recent memory.” The advisory firm Deloitte is calling for a 4.5% to 5.0% increase in Holiday sales as the firm points to elevated consumer confidence, improved customer experiences at the retail level and a relatively low basis of comparison given 2018’s performance. However, among other factors, the firm noted that rising oil prices and the trade tariffs pose headwinds.
Other factors that play against these upbeat forecasts are dates and weather. Last year, Thanksgiving day was early, while it’s late this year. Thus, there are six fewer shopping days between Thanksgiving and Christmas (procrastinators beware). Regarding the weather, last year generally saw unseasonably cold temperatures in November, but warm temperatures in December. The opposite is expected this year according to IBM (yes, IBM, who has a Consumer Weather and Climate Strategy division). Shoppers get in the Holiday mood when the weather turns cold, which means that sales may come later in the season this year.
When segmenting forecasts for e-commerce Holiday sales, the prognosticators are not in the same sled. According to the NRF, e-commerce sales grew 11.5% in 2018, and they forecast that such sales will grow between 11.0% and 14.0% this year. Deloitte is more bullish as the firm projects that online sales will grow between 14.0% and 18.0% and represent approximately 13.0% of all Holiday sales (versus 11.6% last year). However, the consulting firm NetElixir predicts that e-commerce sales will grow only 9.0% this year, and they point to lagging Back-to-School e-commerce sales as an indicator.
Well, we’ll know soon enough who was more right and what factors did and didn’t appear, but in the meantime, fifty-eight days will pass quickly. Get shopping.
Read the full weekly consensus