Study Projects 1.0% Decrease in Holiday Sales
West Palm Beach, Fla. FTI Consulting, a global business advisory firm, released its 2008 Retail Report on Tuesday, forecasting a 1.0% decrease in 2008 holiday season sales, measured from November 2008 through January 2009, compared with an increase of 3.0% in 2007.
“As we outline in the report, this year retailers are facing multiple challenges, each of which is disconcerting in its own right,” said Kevin Regan, senior managing director and retail industry expert at FTI Consulting. “With disposable income down, the housing market in the worst shape it has been in many years and consumers grappling with rising credit-card debt, any retailer hoping to salvage the holiday season will need to work that much harder to keep cash registers ringing into the New Year.”
The key factors driving FTI’s projected change for 2008 are the deceleration of real income growth and the severe deterioration in consumer confidence.
“For the past few weeks, the sector has watched the country’s biggest retailers deliver tepid-to-terrible third-quarter numbers and offer glum forecasts for the fourth quarter. Our report confirms not only the sentiment expressed in the industry but also supports the economic facts on the ground, all of which show that the ongoing economic slowdown is having a deep impact on Main Street retailers,” added Bob Duffy, senior managing director and leader of FTI’s retail industry practice.
Credit terms tightened
Target’s credit card business took a heavy toll on the company’s overall performance in the third quarter, as operating profits in the segment declined 83% to $35 million.
As is the case with other credit card issuers, Target saw delinquency and write-offs increase during the third quarter, as national economic conditions deteriorated.
“This leads to higher than expected bad debt expense both due to write-offs within the period as well as an addition to our reserve of $100 million during the quarter to accommodate anticipated write offs in future periods,” Target cfo Doug Scovanner said.
Based on current trends, Target’s expects a write-off rate for the year around 9% and that figure is expected to increase in 2009, which is why the $100 million addition to the reserve was necessary.
“We continue to tighten all aspects of portfolio underwriting, granting fewer new accounts with lower average credit lines, aggressively reducing open credit lines on many existing accounts and pursuing more proactive collection activities,” Scovanner said.
OfficeMax to bring back ElfYourself campaign
NAPERVILLE, Ill. OfficeMax has teamed up with JibJab Media to bring its popular ElfYourself.com campaign back to the Web for a third year.
OfficeMax and JibJab, best known for online political parodies such as ‘This Land’, began conversations following the 2007 holiday season when the companies scored the number one and number two positions respectively for fastest growing sites on the Web, according to comScore. Over six weeks during the 2007 holiday season, ElfYourself received more than 193 million site visits, and more Americans were visiting ElfYourself.com ( http://www.elfyourself.com/ )than Facebook.com ( http://www.facebook.com/ ), according to Web measurement firm Quantcast.
ElfYourself enables users to create free personalized holiday eCards by uploading their photos and transforming themselves, family and friends into dancing elves. OfficeMax and JibJab have jointly enhanced the ElfYourself experience by increasing the number of elves a visitor can create, from four to five, as well as offering three new dances including a disco dance, country dance and the Charleston.
This year ElfYourself will be running on JibJab’s Starring You Technology platform that not only enables users to create personalized online videos, but also get their personalized elves printed on greeting cards and holiday gifts such as ornaments, mouse pads, coffee mugs, and playing cards. For a small fee, users can also get a downloadable version of their video that they can watch offline, burn to a DVD or watch on their mobile devices.