NRF: Holiday sales to rise between 4.3% and 4.8%
Retailers can expect a healthy rise in holiday sales — just not as big a one as last year.
The National Retail Federation expects holiday retail sales in November and December — excluding automobiles, gasoline and restaurants — to increase between 4.3% and 4.8% over 2017 for a total of $717.45 billion to $720.89 billion. (The NRF numbers include online and other non-store sales.)
The forecast compares with an average annual increase of 3.9% over the past five year, but it is down from last year. In 2017, holiday sales rose 5.3% to $687.87 billion, the largest increase since the 5.2% year-over-year gain seen in 2010 after the end of the recession.
In addition, NRF forecasts that retailers will hire between 585,000 and 650,000 temporary workers this holiday season. The total is up from last year’s 582,500.
“Last year’s strong results were thanks to growing wages, stronger employment and higher confidence, complemented by anticipation of tax cuts that led consumers to spend more than expected,” NRF chief economist Jack Kleinhenz said. “With this year’s forecast, we continue to see strong momentum from consumers as they do the heavy lifting in supporting our economy. The combination of increased job creation, improved wages, tamed inflation and an increase in net worth all provide the capacity and the confidence to spend.”
The holiday forecast is consistent with NRF’s forecast that annual retail sales for 2018 will increase at least 4.5% over 2017.
A closely-watched holiday forecast from Deloitte came in higher — at 5% to 5.6% — than the NRF, while AlixPartners’ holiday forecast was on the low side, calling for a 3.1% to 4.1% increase.
BDO provides retail bankruptcy update
More of the retailers that filed for bankruptcy in the first half of 2018 did so seeking a reorganization with store closings than those that did so in 2017.
That’s according to BDO’s just-released biannual bankruptcy update, Retail in the Red, which offers data on retail bankruptcies and store closures for the first half of 2018. For the first six months of 2018, more than a dozen retailers with 20 or more stores filed for bankruptcy, including The Bon Ton Stores, The Walking Company, Claire’s Stores, Southeastern Grocers, and Tops Friending Markets. In July and August, at least six other retailers filed for bankruptcy, including Brookstone, National Stores, Heritage Home, Real Mex Restaurants, Gumps and Samuel Jewelers.
“While the economy has been expanding in 2018, the sizable number of brick-and-mortar store closings and retail bankruptcy filings reflect shifting consumer preferences, the continued growth of e-commerce and the United States’ over-built retail footprint,” the report said. “Consumers are spending a smaller share of their budgets on clothing and accessories than in the past, and younger generations continue to spend more on experiences than goods. These shifts in spending patterns continue to drive sales away from mall-based retailers that primarily sell clothing and accessories.”
BDO expects to see more store closings announced, as well as more Chapter 11 filings, especially by retailers that are “too highly leveraged to fund a transformation to new omnichannel strategy, or those that assume simply shutting doors will keep them afloat.”
“That said,” the report noted,” a retailer that is not Amazon must be realistic about its status quo before beginning any sort of transformation, taking steps to evaluate its financial strengths and weaknesses, and considering issues such as internal digital capabilities, supplier and distributor liabilities and core differentiators. Only at that stage can a retail business be optimized to prepare for calculated change and refining its business strategy to better align with customer needs.”
Overall, positive economic signs bode well for retailers for the remainder of year, according to BDO, but the consequences of trade tensions and shifting consumer preferences continue to loom. In addition, gas prices have been increasing and the Federal Reserve continues to gradually raise interest rates.
Click here to see the full report.
Toys ‘R’ Us comeback in works
There may be a second act for Toys “R” Us.
The top lenders of Toys “R” Us canceled the bankruptcy auction of the company’s intellectual property assets, which include its brand names, mascot Geoffrey the Giraffe, and website domains. Instead, the group (Geoffrey, LLC) announced it is moving forward with a plan to acquire substantially all of the assets and revive the brand.
The announcement comes after a five-month marketing effort by Boston-based investment bank Consensus, which was hired to market the assets. The effort resulted in a number of qualified bids. However, in a court filing, the group said it now believes that it stands a better chance of a realizing a return on its investment by potentially reviving the toy chain as opposed to selling it off in parts.
Under the new plan, the reorganized company will own rights to the Toys “R” Us and Babies “R” Us brands in all markets globally, with the exception of Canada. It will also become the licensor of the brands to the company’s existing network of franchisees operating in countries across Asia, Europe and the Middle East, and in South Africa.
In addition to continuing to service these markets, the new owners are actively working with potential partners to develop ideas for new Toys “R” Us and Babies “R” Us stores in the United States and abroad that could bring back these iconic brands in a new and re-imagined way.
Toys “R” Us liquidated its U.S. operations this summer after the lenders backing the bankruptcy financing said they had lost confidence in the company’s reorganization plan.
The new plan is subject to final approval by the bankruptcy court.