Retail group: Sales to grow 3.7 percent to 4.2 percent
NEW YORK (AP) — Despite a bumpy holiday season, chains like The Limited shutting down and department stores such as Macy’s closing stores, the largest retail trade group says it’s still optimistic that sales will grow this year — especially online.
In issuing its forecast Wednesday, the National Retail Federation did caution that shoppers will remain hesitant until there’s more certainty around issues like health care and taxes under President Donald Trump.
It estimates retail sales will rise 3.7 percent to 4.2 percent this year, which could surpass last year’s 3.75 percent. Online sales and other non-store business, which are included in the overall number, are expected to be stronger and rise between 8 percent and 12 percent. The figure excludes sales at automobile dealers, gas stations, and restaurants.
Even as malls suffer, the NRF said last month that sales in November and December rose 4 percent, beating a forecast of 3.6 percent. Online sales rose 12.6 percent — with online leader Amazon.com dominating the scene.
“Our view is that the economy is on firmer ground and that consumers are in a better place,” the trade group’s CEO, Matthew Shay, said during a conference call.
He cited growing personal income and job growth, and said potential tax reforms under Trump could spur economic growth. But he warned that any regulations that increase the cost of everyday products would be harmful. In particular, retailers are opposing a Republican proposal to impose a border tax on imported goods. It’s designed to encourage bringing manufacturing back to the U.S., but it would likely lead to higher prices on items like clothing.
Aside from navigating a new political environment, stores must adjust better to the shift in shoppers’ habits.
“The vast majority of retailers can’t keep pace with consumers moving to mobile,” said Ken Perkins, the president of research firm Retail Metrics LLC, which predicts another fourth-quarter earnings decline collectively for the retail industry. “Shoppers are shopping at fewer stores, and that’s going to accelerate the pace of store closures.”
He noted that the economy is in “the best shape it’s been in seven years, but the middle-income consumer is still struggling — and they’re spending in different channels.”
Big stores like Wal-Mart and Target are set to report their holiday results this month, which will offer more insight into shoppers’ habits. Target last month lowered its fourth-quarter outlook because of weak holiday sales.
Traditional retailers feel particular pressure from online leader Amazon, whose Prime shipping program with an annual $99 membership fee is popular among shoppers who are ordering everything from toothpaste to clothing and getting free perks like streaming music and video. Amazon is also expanding into areas like building its own shipping and logistics unit, which could lower its own costs and possibly those for customers. That would put even more price pressure on traditional retailers.
That kind of competition, as well as people spending less on clothes and looking for more distinctive styles, have meant mall stores are suffering. The Limited announced last month that it was shutting down all 250 U.S. stores.
Even at the higher end, sales are lackluster and executives are leaving. Tiffany’s CEO abruptly stepped down after weak holiday sales. And Ralph Lauren CEO Stefan Larsson is leaving in May because of a clash with the company’s namesake founder as the brand tries to reinvigorate itself.
In particular, department stores — once the pillars of American shopping — need to react more quickly to changing shopping habits. The reported preliminary talks between Saks Fifth Avenue owner Hudson’s Bay Co. and Macy’s, focusing on the value of its real estate holdings, underscore that Macy’s efforts to look for new business opportunities haven’t been enough.
Macy’s, which has more than 800 stores, says it’s closing 68 this year as part of the 100 it announced last year. Ailing Sears Holdings Corp. says it’s closing 108 more Kmarts and 42 more Sears locations.
But analysts say they need to close more. Real estate research firm Green Street Advisors says about 800 stores, or 20 percent of all U.S. mall anchor space, would need to close to match the inflation-adjusted sales productivity of 2006.
Beyond becoming leaner, experts say chains need to rethink how they do business, such as shortening the time from conceiving a product to delivering it to stores, or creating unique products for shoppers demanding more personalization.
“We really are at a tipping point,” said Steve Barr, consumer markets leader at PwC, who expects stores and brands to reduce the timeframe for new products to just a few months from the industry average of nine months.
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