Retail just might be full of holiday cheer come December if promising forecasts for the season prove true.
On Thursday the National Retail Federation (NRF) said it expects holiday retail sales during November and December to rise between 3.8 percent and 4.2 percent this year, and total $727.9 billion to $730.7 billion–even as the impact from tariffs remains uncertain.
That projection is a gain over the average sales increase of 3.7 percent over the past five years, according to NRF. Holiday sales in 2018, which totaled $701.2 billion, gained just 2.1 percent due to the partial government shutdown. And NRF is expecting that online sales, included in the total, will rise between 11 percent to 14 percent this year to range from $162.6 million and $166.9 billion, up from $146.5 billion last year.
NRF CEO Matthew Shay said, “The U.S. economy is continuing to grow and consumer spending is still the primary engine behind that growth.”
While he noted that there’s been a slowdown due to uncertainty from trade issues, interest rates, global risk factors and political rhetoric, Shay believes the consumer appears to have the wherewithal to spend over the holiday season. “Consumers are in good financial shape and retailers expect a strong holiday season,” he added. “However, confidence could be eroded by continued deterioration of these and other variables.”
NRF chief economist Jack Kleinhenz added, “Job growth and higher wages mean there’s more money in families’ pockets, so we see both the willingness and ability to spend this holiday season.”
What isn’t clear is the effect tariffs could have on holiday spending. NRF noted that some holiday merchandise, including apparel and footwear, is subject to new levies enforced on Sept. 1, while tariffs on some other categories are not scheduled to take effect until Dec. 15.
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“Retailers are using a myriad of mitigation tactics to limit the impact on consumers, and the impact will ultimately vary by company and product. Small businesses, in particular, have already been forced to raise prices,” NRF said, noting that 79 percent of consumers surveyed for NRF last month indicated concern that “tariffs will cause prices to rise, potentially affecting their approach to shopping.”
A separate study from Coresight Research predicted U.S. retail sales for the holiday period to increase 4 percent, with slightly more than 23 percent of all nonfood retail sales from the online channel this year.
“New business models and distribution channels have re-shaped consumers’ shopping behavior,” the study noted, adding that the ongoing trend of holiday shopping is become less important to key retailers because the ease and convenience of internet shopping has trained many consumers to gather their holiday goods throughout the year. The study also noted that higher wage growth and lower gas prices point to higher sales during holiday, in line with the NRF’s findings.
And while the shopping season is short this year–Thanksgiving is late, which translates to six fewer days to shop–the study noted that a shorter season could bring about a boost to both sales and profits for some retailers because it can drive more last-minute shopping and lowers reliance on price sensitivity.
Last month, Deloitte forecasted holiday sales to increase 4.5 percent to 5 percent, while AlixPartners predicted an increased of between 4.4 percent to 5.3 percent. On Wednesday, Salesforce said it expects U.S. online sales to reach $136 billion this year.