15th annual CGP forecast predicts 3.2% holiday growth

U.S. consumers will generate only a lackluster 3.2% year-over-year increase in holiday sales, according to the latest forecast of November-December spending.



Customer Growth Partners’ 15th Annual Holiday Forecast says retail sales for the holiday period will reach $607 billion, a new record, but the anemic 3.2% pace reflects declining median incomes for all but the top 20% of households.



“Contrary to much conventional wisdom, the single best predictor of retail sales is neither unemployment nor consumer confidence — but growth in disposable income,” said CGP president Craig Johnson. “And the fact is that real median incomes have flat-lined — if not declined — for many years now.”



The key drivers behind the retail weakness, according to CGP, are lagging income growth and, relatedly, the declining share of the population with full-time jobs. Less than 49% of working age adults now hold a full-time job, the lowest in decades, and down from 54% as recently as 2006.



In addition to depressing overall retail spending, Johnson said: “the shift to a part-time or ‘gig’ economy has caused spending to rotate from discretionary goods to non-discretionary goods and services. Consumers with full-time jobs spend against both needs and wants — but those with part-time jobs spend only against needs.”



Additional key findings of CGP’s 15th Annual Holiday Forecast include:



E-commerce/direct-to-consumer sales continue to decelerate, after two decades of robust double-digit growth, to just under 7% YOY growth for holiday 2015.



Marking a return to tradition, toys and sporting goods will outpace other merchandise sectors with growth of 4.9%, triggered by an avalanche of Star Wars merchandise.



Also in a return to traditional gift-giving, apparel will pick up with growth of 3.1%, led by sweaters, notably long belted sweaters, often in Native American prints, wraps and capes, and—like last year—robust boot and bootie demand.



Home-related categories will also shine, boosted by the ongoing — if softening — rebound in the housing market, led by the Home Improvement sector with growth of 4.8%, and home furnishings, up 4.6%.



Most department stores will struggle again this year, declining by almost 2% YOY, as stores close in aging malls and consumers decamp for discount or off-price venues, smaller boutiques — or simply online.



Consumer electronics will also see a sluggish year, with severe price compression in most TV categories, another dismal sales year in tablets, soft demand for watches, all partially offset by strong demand for AAPL’s i6s phones, although even that demand may have peaked by holiday.



“Holiday shoppers in 2015 are cautious in their spending, but relentless in seeking out value,” Johnson said. “But many stores selling strictly on discretionary goods will find this another tough season, with excess inventory and rampant promotions. Even with low gasoline prices, Holiday 2015 will decelerate sharply from last year, and unless income growth resumes for the 80% of households with no real income growth, Santa will be hard-pressed to fill the Christmas stockings for either consumers or retailers.”