Moody’s Expects Flat to Modestly Better Holiday Retail Season

Sees modest rise of 1.3% in 2010 as high unemployment continues to crimp consumer purchases.

Excerpts from Annual Outlook: U.S. Retail Outlook Is Stable But Consumers Are Still Pressured

Moody’s says its outlook for the U.S. retail industry remains “stable” because “we believe that sales and earnings across the industry will be fairly stable over the next 12 to 18 months, neither materially improving nor eroding over their current weak levels.” In addition, the stable outlook acknowledges the sizable portion of U.S. retail sales and earnings generated by drugstores, discounters and supermarkets — sectors that mostly sell consumables and are expected to remain solid.

We expect retail sales will rise a modest 1.3% in 2010, after an estimated 5% decline in 2009. Although this would reverse a downtrend in retail sales in place since mid-2008, it would not bring back sales to their pre-recession levels. Sales growth will pick up in 2011, upwards of 3.5%.

• High unemployment, low house prices and tight credit will cause consumers to remain focused on boosting their savings and repaying debt in the year ahead, cutting short any material improvement in sales.
• Some segments will demonstrate strength while others will demonstrate weakness. A sizable portion of the retail industry is represented by drugstores, discounters and supermarkets — segments set to perform solidly in the year ahead.
• Department stores and specialty retailers will continue to face sales and earnings pressure; however, the pace of declines in these sectors will likely moderate to a level that will not materially weaken the overall U.S. retail credit profile.
• Headed into the holidays, we believe fourth-quarter earnings will be flat to modestly better than last year — signaling that we believe the period of significant earnings declines is mostly behind us.

Comments

[Bjarne Jensen:]

Without structural changes, just how will the economy get better? This is not a rhetorical question, I really would like to know how Moody's thinks the economy will get better?

Oct 31 03:47 PM

[Robespierre2:]

This specialty retailer saw steady increases for the last 3 years - month after month.... then July, August, Sept and Oct saw dips.

Now November is up....

November is NEVER up - as we usually lose market share to the malls and big boys.... so who knows?

Nov 18 10:08 AM