Business

Retail Trade Group Sees Holiday Sales Up 3.6% to 5.2%, Posting ‘Strong Finish' to 2020 in Spite of Pandemic

Bryan R. Smith | AFP | Getty Images
  • The National Retail Federation expects 2020 holiday sales to rise between 3.6% and 5.2% year over year, amounting to between $755.3 billion and $766.7 billion. 
  • NRF President and CEO Matt Shay said he expects the industry could have a "strong finish" to 2020, in spite of the challenges from the coronavirus pandemic.
  • Americans have more money to spend that they were previously using on things like travel, NRF said, while there is also renewed hope for the distribution of an effective Covid vaccine.

Retailers could end up having a strong finish to 2020, despite all of the challenges that the coronavirus pandemic has dealt the industry, according to a new forecast that cites a strong stock market, rising home values and record personal savings rates as factors that could boost spending.

The National Retail Federation said Monday it expects holiday sales during November and December to rise between 3.6% and 5.2% year over year, amounting to between $755.3 billion and $766.7 billion.

"Given the pandemic, there is uncertainty about consumers' willingness to spend," NRF Chief Economist Jack Kleinhenz said. "But with the economy improving, most have the ability to spend."

With spending on travel and entertainment largely sidelined, consumers have more money to spend on other items, the group said.

Last year, holiday sales rose 4% to $729.1 billion, NRF said. And holiday sales on average have increased 3.5% for the past five years. The sales forecast excludes automobile dealers, gasoline stations and restaurants.

Some shoppers may look to avoid crowded stores, which will shift more spending online, the group said. Retailers have also been urging shoppers to use services like curbside pickup to try to ease the stresses on their supply chains. NRF is projecting a jump of 20% to 30% in online and other non-store sales, amounting to between $202.5 billion and $218.4 billion this holiday season, compared with $168.7 billion in 2019.

"The outlook for the holiday season is very bright," NRF President and CEO Matt Shay said during a call with members of the media. "We've seen consumers are very engaged [and] looking for opportunities to celebrate. ... We expect a strong finish to the season."

Delayed outlook

The forecast this year from NRF, the industry's leading trade group, was delayed by the uncertainty stemming from the coronavirus pandemic. Typically, NRF releases its expectations in early October.

The presidential election earlier this month also was a distraction for consumers, especially during the period when votes were still being counted. The back-and-forth talks around the potential for additional government stimulus, which would have been a welcomed gift for consumers and companies ahead of the holidays, has proven to be another wildcard.

Retail sales in the United States increased by less than expected in October. The possibility still remains that sales could be hurt further by the spike in Covid infections and deaths since Election Day. Unemployment remains elevated, and some states have once again begun to shutter indoor dining, and roll out other restrictions that could result in additional furloughs or layoffs.

Hope around the distribution of an effective Covid vaccine has sparked more recent optimism, however.

British pharmaceutical giant AstraZeneca said Monday an interim analysis of clinical trials showed its coronavirus vaccine has an average efficacy of 70% in protecting against the virus. That news came after a string of encouraging vaccine results over the course of this month, following late-stage trial readouts from Pfizer-BioNTech and Moderna.

"The promise of the prospect of not only widely distributed and highly effective vaccines, but also the increased progress on therapeutics to treat the coronavirus ... are all having an impact on consumer psyche and behavior," Shay said on Monday.

Retail stocks rally

Ahead of NRF's forecast Monday, shares of Gap, Express, Nordstrom, Macy's, Kohl's and the mall owner Simon Property Group were rising. Investors have been anticipating consumers will soon be more comfortable retuning to malls and spending more money on apparel and accessories.

The upbeat forecast from NRF fueled accelerated the rally: Macy's stock price rose 15%, Nordstrom rose 10%, and Kohl's and Abercrombie & Fitch shares gained 7%.

Early on in the pandemic, a clear divide was drawn between so-called essential retailers like Target and Walmart, and nonessential retailers like Macy's and Gap. The latter were forced to shut down, while retailers that sold items like groceries and household cleaning supplies were allowed to remain open.

NRF and its retail members have since been lobbying states to make sure that distinction is not made again.

"No retail business is built to be closed," Shay said. "And so, just arbitrarily saying you've got to be closed ... that clearly was in some ways the hand of government tilting the scales of the marketplace against one category of business in favor of another under the guise of public health."

"We have been calling on state and local governments really to focus on the ways in which we're doing things safely ... not focus on products," he said.

Local and state governments have largely been the ones implementing safety measures. As a result, retailers are dealing with a patchwork of regulations that vary from store to store. The latest rounds of restrictions have focused mostly on rules governing indoor dining.

Many in the industry hope that widespread vaccination will remove these restrictions and open the economy, once again.

Macy's CEO Jeff Gennette said last week that the department store chain is planning for a gradual improvement in its business in the back half of 2021, "based on a potential vaccination." But, he said, the retailer also has another scenario "that would suggest that we don't have the vaccination that's scalable."

"We'll be ready for either," he said.

But with Black Friday just four days away, Americans' anxiety about going to stores to shop remains heightened. More are planning to buy online, and they are checking items off their list earlier in the season. A survey from NRF earlier this month found 42% of consumers had started their holiday shopping earlier this year than they normally do.

Read the full press release from NRF here.

Copyright CNBCs - CNBC
Contact Us