Total holiday retail sales are expected to increase 5.0 percent over last year, bringing holiday spending to $435.3 billion, according to the National Retail Federation (NRF). In comparison, NRF documented the rise in 2004 holiday sales at 6.7 percent to $414.7 billion.
“A combination of many factors, including energy prices, the job market, disposable income and consumer confidence, will ultimately affect retailers sales this holiday season,” said 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 percent) occur during the holiday season, making it the most important time 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 Hurricanes Katrina and Rita and high prices at the pump 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 won’t 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,” said NRF president and CEO Tracy Mullin. “Stores are planning for holiday sales and promotions, so discounted prices won’t have a negative effect on profits.”
NRF defines holiday retail sales as retail industry sales that 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, excluding sales at automotive dealers, gas stations and restaurants.