With the final quarter of the year fast-approaching — including the much-anticipated holiday season — forecasts for retail sales are beginning to pile up.
The Retail SPDR (XRT) and Market Vectors Retail ETF (RTH) are both beating the broader market so far this year despite some second-quarter weakness and spending concerns — and holiday retail sales will likely determine whether that run can continue.
The shopping period surrounding Christmas is crucial for retailers, as it accounts for as much as 40% of annual sales.
With that in mind, let’s take a look at various retail sales, hiring and company forecasts in the lead-up.
Consulting firm Deloitte says sales will rise between 4% and 4.5% from November to January — in line with the gain seen last year and one of the sunnier forecasts out there. ShopperTrak, on the other hand, recently forecast a 2.4% year-over-year improvement — not quite as good news for names stores like Gap (GPS) and Guess (GES).
Michael Niemira, the chief economist of the International Council of Shopping Centers, falls more on the optimistic side of things, though, predicting a rise of 3% to 3.5% for holiday sales — “not a gangbuster season, by any means, but not a dismal one either,” he said.
But Adrienne Tennant — a retail analyst for Janney Montgomery Scott — said in an interview that she believes things will be ugly, and maintains that a flat season would actually be something to cheer about. More specifically, she expects trouble for teen retailers, including the big three of Abercromie & Fitch (ANF), Aeropostale (ARO) and American Eagle (AEO).
One ray of sunshine: Walmart (WMT) — despite a recently lowered outlook and complaints about low traffic — plans to hire 55,000 seasonal workers for the coming season. The world’s largest retailer also is going to move more than 35,000 workers from temporary to part-time and the same amount of part-time to full-time.
Kohl’s (KSS) plans to hire more than 50,000 seasonal workers as well. The bad news, though, is that holiday hiring overall is expected to fall 8% year-over-year to 700,000 employees — a drop following the 14% increase of 2012.
That’s bad news for JCPenney (JCP) and Bon-Ton (BONT) considering both stocks already are struggling … and should fare even worse amid a bleak retail landscape.
Macy’s (M) also says it has been struggling as consumers focus more on big-ticket durable goods and less on apparel. That’s good news for companies like Best Buy (BBY) and Hhgregg (HGG), though.
Specialized brands might not be dependent on broader holiday retail sales, but instead could live or die by their individual inventories, promotions and so on. Urban Outfitters (URBN), L Brands (LTD) and Express (EXPR) have momentum heading into the all-important season, while Francesca’s (FRAN) and Lululemon (LULU) have hit some bumps.
Looking at luxury specifically, Michael Kors (KORS) is also going strong, with its full-year and fourth-quarter estimates marching upward in recent months. Expectations for Q4 and fiscal 2013 have been falling for Saks (SKS), but mixed for Tiffany & Co. (TIF).
As of this writing, Alyssa Oursler was long RTH. Follow her on Twitter at @alyssaoursler.
