Holiday sales forecasts getting better, but retailers face another down year

We're another week closer to the start of the holiday shopping season and another sales forecast has come in slightly better than expected. Or at least not as bad as expected, which merchants will count as a win in this recessionary year.

The National Retail Federation weighed in with a projection that sales will reach $437.6 billion, one percent below last year, but better than the three percent drop expected for the whole year. It's also an improvement over the 3.4 percent drop of last year, which suggests consumers are opening their wallets again.
Mild optimism got more support from the weekly sales numbers issued by the International Council of Shopping Centers. Its tally of sales for the last week of September was up one percent over the same time last year and up 0.6 percent above the week before.

Of course, being up above last September's debacle is faint praise, since that's when the credit crisis came home to roost. But while ICSC Chief Economist Michael Niemira held to his forecast of a two percent drop in sales for September, his statement said he sees "a bias on the stronger side" when full-month sales tallies come out Oct. 8.

After a series of grim forecasts in the summer, projections have turned slightly better in recent weeks, thanks to some mild improvement in some of the leading economic indicators.

But analysts aren't getting their hopes up for this holiday; after ten years of sales growth averaging 3.39 percent annually, it is going to be a threadbare season. There are no must-have items to drive customers in droves to the stores, and retailers have been methodically trimming inventory through the year to avoid big markdowns.

"As the global economy continues to recover from the worst economic crisis most retailers have ever seen, Americans will focus primarily on practical gifts and shop on a budget this holiday season," said NRF Chief Economist Rosalind Wells, in a statement.

And even if consumers can be convinced to splurge on big-ticket items like flat screen TVs, stores won't be getting as big a bang for the buck. Electronics have seen a big shot of price deflation, so profits will be hard to come by in that important category.

Indeed, by most reports, retailers have gone back to basics for this holiday because shoppers aren't looking for anything fancy. BusinessWeekreports stores are pushing gingerbread houses, ornaments and small gifts to cater to shoppers who are still spooked by an unemployment rate near 10 percent. There will be no upside-down Christmas trees or offbeat gadgets this season.

If the back-to-school shopping season is any gauge, shoppers will come out in the end, probably hanging back until the last minute and shopping carefully and frugally. And barring any new shocks to the system, stores will scrape by this holiday season.
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