Our Thoughts

2011 Holiday Shopping Season

When the 2011 holiday shopping season kicks-off on Black Friday (the day after Thanksgiving, not the stock market crash of 1869), many retailers are expecting good things from consumers despite high unemployment, tight credit and a volatile stock market. In fact, several leading retail analysts are predicting modest sales increases over last year. If the experts are right, a successful holiday season could be the perfect gift for our ailing economy.

Signs of a Potentially Decent Holiday Season

The Department of Labor reported that the producer price index fell 0.3 percent in October.

Business optimism improves. The National Federation of Independent Business (NFIB) Optimism Index edged up 1.3 points in October, its biggest move since January 2010, and slightly higher than the average since January 2009. The Index, which is based on periodic surveys of NFIB’s membership, measures overall optimism within the independent business community.

Sales at major chain-stores increased during October. According to the International Council of Shopping Centers (ICSC), their index of 80 top retail chains (e.g., J. C. Penney, PetSmart and Starbuck’s), advanced 1.0 percent to its highest level in two months. Redbook Research, one of the largest providers of retail trends analysis, also reported a modest increase of 3.1 percent in year-over-year sales at retailers they follow including Abercrombie and Fitch, Target and Walgreens.

Third quarter credit card volumes move up. MasterCard International, the number two payment processing company behind VISA, reported substantial increases in both the dollar volume and number of credit card transactions in the third quarter, surpassing the previous highs from three years ago. The company said the increases demonstrate an improvement in the growth of revolving credit and consumer spending.

Improving business sentiment, higher seasonal purchasing at chain-stores and increasing credit card volumes all bode well for the retail industry this holiday season.

Retail Sales Predictions

The Commerce Department reported that retail sales increased 0.5 percent in October.

Consumer spending accounts for about 70 percent of economic activity in the U.S., so increased sales in the retail sector are important in kick-starting our sluggish economy. Three of the leading analytic firms in the retail space are predicting an increase in retail sales this holiday season:  (1) the National Retail Federation (NRF) is predicting a 2.8 percent increase, (2) the International Council of Shopping Centers (ICSC) predicts an increase of 3.5 percent, and (3) ShopperTrak anticipates an increase of 2.2 percent.

A complimentary survey of consumers found that 17 percent of holiday shoppers plan to spend more this year than last and that 56 percent plan to spend the same amount. That means only 27 percent of consumers plan to spend less this year than they did in 2010. That’s not bad, but shoppers who do spend money this year will be looking for bargains. As a result, discounters such as TJ Maxx and Ross Dress for Less are likely to do well, while mid-level stores like J.C. Penney and Kohl’s could take a hit. Interestingly, high-end retailers such as Bloomingdale’s and Nordstrom are also expected to have a successful season.

Adding More Jobs

In addition to slight increases in sales this holiday season over last, the NRF is predicting 480,000 to 500,000 new seasonal jobs this year. An on-line survey by Harris Interactive revealed that 30 percent of retailers are planning to hire seasonal help this year. Retailers include Best Buy, J.C. Penney, Sears and Toys R Us. And, many of these jobs come with higher wages. In the Harris survey, 53 percent of employers will pay $10 or more per hour and 14 percent plan to pay $16 or more. Both figures are increases over last year.

There is the potential for more good news for jobseekers this holiday season. Many companies that already added seasonal staff plan to continue recruiting as the holiday draws near. Also, some companies haven’t determined how many additional positions they plan to fill. Finally, shippers that supply the retail sector and/or deliver to consumers are also hiring. UPS alone has 4,000 job listings.