Like the stores that put out Christmas decorations before Halloween, it’s become a Barataria tradition to put up holiday sales projections in mid-October. Don’t blame us, that’s when they come out as retailers gear up for the mid-November rush.
Last year just over $600B in sales went out the doors at retail establishments, about 19% of their total for the year. $90B of that was online. 2014 was a big turning point, marking the biggest selling season since 2009. Will 2015 come in even bigger?
Retailers are counting on it, and that’s the prediction. A big holiday shopping season to launch us into a happier 2016.
There are many reasons why holiday shopping season is important beyond its large share of retail sales. This is the one time of year when the media gets a consistent and solid read on the mood of consumers. They have been one of the lagging indicators for a turnaround, not showing much life until earlier this year. A big improvement in consumer attitudes is what remains for something that will be called a “recovery”.
Consumers have been slow because job growth has been slow, so it’s one big vicious cycle.
The National Retail Federation (NRF) is calling for a 3.7% increase over last year, down a little bit in growth from 2014’s 4.1%. That would be a total of $630B in sales, $105B of it online. Since they were perfectly accurate for the last two years their estimate has to be taken seriously.
Deloitte is calling for a 4% increase, but there’s a problem with comparing estimates. It appears that everyone has a different way of defining “holiday shopping”, with Deloitte clearly looking at all retail November to January in their $960B estimate. Given that the estimates are a least close with different methodologies we have to say we have something like a consensus.
Christmas 2015 will be a good one.
There are a few notes of caution, however. In the past, deep discounting by retailers has been a seriously limiting factor, driving up the frenzy but limiting the potential for serious upside. That is likely to be repeated this year with Walmart profits way down and investors more than a little nervous about their prospects. They have a terrible incentive to dive up the top line, sales, even at the expense of the bottom line, profits.
The NRF’s Chief Economist Jack Kleinhenz has his own notes of caution, too. The solid growth could have been better had 2015 not been so mixed:
“While confidence data is encouraging, slower job growth in 2015, deflationary retail prices and the mix of consumer spending somewhat shifting toward big ticket items and services, as well as the wild card in our government spending debates, will all contribute to the slower growth rate of sales expected for the holiday season.”
This should be taken as reason to believe that the most likely reason the estimates would be off is that they are too low. It would take a bit more good news on the job front to boost confidence and the lack of a government shutdown will also be good.
As far as jobs go, last year 714k jobs were created just for the holiday rush, and this year there may be as many as 35k more. Retailers found themselves short-handed many times last year as they were just a bit conservative in the face of high estimates of growth.
We have to remember that this is already accounted for in the “seasonal adjustment”, so don’t be too excited. Still, a bump of 5% in jobs over last year is not bad, and it may be the thing that gets us out of the cycle we’ve been in.
All together, the prediction is for a holiday season that will be pretty good even though it could have been better. Hopefully that will be what helps us get through the entire winter without a downturn like we have seen two Januaries in a row.