Bleak Holiday Sales Expected

By Ylan Q. Mui
Washington Post Staff Writer
Tuesday, September 23, 2008

The retail industry is bracing for what economists say could be the weakest holiday shopping season in nearly two decades as financial woes continue to bear down on consumers, according to several forecasts.

Retailers are tightly controlling inventory, on sending merchandise shipments falling. Seasonal employment is expected to drop from last year. And shoppers are likely to cut out personal indulgences to pay for gifts.

"The trends in economic conditions offer no sign of an impending recovery," said Frank Badillo, senior economist at TNS Retail Forward.

Consulting firm Deloitte has forecast growth of just 2.5 to 3 percent for November through January -- one of the worst rates since the country emerged from the 1991 recession. TNS Retail Forward, a market research firm, predicts sales for the quarter to inch up 1.5 percent, another low not seen since 1991.

Meanwhile, the National Retail Federation, an industry trade group, is slightly more optimistic. It is expected to predict today that retail sales in November and December will increase a meager 2.2 percent to $470.4 billion, the weakest growth since 2002.

Higher prices for food and fuel coupled with falling home values have squeezed Americans' wallets this year, and the ongoing turmoil on Wall Street is expected to spook shoppers through year's end. A lackluster holiday season could spell more trouble for the economy, which is fueled by consumer spending. A recovery is unlikely without a rebound from shoppers.

Many of the economic headwinds battering consumers in 1991 are being felt today, retail experts said. Then, the country was struggling to emerge from a recession prompted by the savings-and-loan crisis on Wall Street that trickled down to Main Street. The housing market was sluggish, and fuel prices rose as the country fought a war in the Middle East.

Shoppers had -- or at least felt they had -- less discretionary income to spend during the holiday shopping season. Industry experts expect consumers to have a similar mind-set this year. Krugman said he thinks shoppers will buy presents for their loved ones but predicts they will cut back on the extras for themselves. Last year, consumers reported planning to spend $100 on gifts for themselves.

Retailers are also taking a hard look at their bottom lines. Stacy Janiak, U.S. retail leader at Deloitte, said many companies have reduced inventories for the holiday season from previous years, helping them avoid unplanned markdowns. Traffic at the country's major retail container ports is expected to decline 6 percent this year, according to a survey by NRF and consulting firm Global Insight. It is the first drop in the five years since the groups began tracking traffic.

Last year, retailers hired 698,300 employees between October and December, a 6.5 percent decline from 2006, according to consulting firm Challenger, Gray & Christmas. This year, the numbers are expected to be even lower. Challenger estimated hiring could fall below 600,000 workers.

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