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The holiday season of November and December can account for around 25%- 40% of annual sales for retailers, according to the National Retail Federation (NRF). July sales figures, as well as back-to-school sales, reflected the resilience of consumers, despite cautious spending and slow economic recovery. This bodes well for the holiday season.

Amongst the earliest forecasts for the holiday season, ShopperTrak said that it expects a 3.3% rise in sales, a little below the 3.7% increase experienced last year, but still respectable given the persistent unemployment. It also expects more foot traffic (2.8%) than last year's decline of 2.2%. According to ShopperTrak's survey, foot traffic is expected to be up 3.5% for apparel and accessories stores, while Best Buy (BBY) and RadioShack (RSH) will stay out of favor with 8% less traffic, as people resort to shopping online to get better bargains on sites like Amazon (AMZN).

The 10-year average sales increase was 2.6% for the holiday season, according to the NRF. In 2011, the NRF had initially issued a holiday season forecast of a 2.8% increase in sales (excluding automobiles, gas stations and restaurants), which it later revised in mid-December to 3.8% or $469.1 billion, as consumer spending surpassed expectations despite economic worries. The actual sales came in at 4.1%, which were still less than the 5.2% increase in 2010. The NRF has yet to release this year's forecast, which it usually does in October. The table given below summarizes the last three year's holiday sales forecasts and actual sales growth, and shows that NRF forecasts are generally more conservative, as consumers spend despite economic worries.

NRF forecast gain

Actual

2011

2.8% (later raised to 3.8%)

4.1% ($471.5 billion)

2010

2.3%

5.2% ($452.9 billion)

2009

-1%

-0.4%

Another survey by 14 retailers shows that three-fourths of retailers expect an increase in holiday sales. This optimism is more than what it was a year ago. Imports are also a good barometer to judge retailer sentiments, as they would not import much if they do not expect to sell their products. The first half of 2012 experienced a 3% rise in the volume of import cargo at retail container ports, according to the NRF. September is expected to show an 8.5% increase in volume, while the expected growths for October and November are 11.7% and 1.9%, as retailers stock up for strong holiday sales.

The department store Macy's (M), which has beaten analyst estimates for same-store sales this year, was one of the best performers in the last holiday season. The CEO of Saks (SKS) also sees a healthy environment for shopping in the holiday season. Discounters like TJX (TJX) and Ross Stores (ROST) will likely remain in favor. KSS' shares were up 3.5% after ShopperTrak's positive retail expectations were quoted by Reuters.

Strong promotions like those in the back-to-school season can be expected to start by October's end at most retailers. Online sales are expected to form a large chunk of retail sales, as consumers do more comparative shopping online to get the most out of their budgets. According to the NRF outlook for 3Q2012, e-commerce's share is at a record level of total retail sales. In 2011, there was a 15% jump in online spending to $31 billion. Therefore, companies concentrating on online shopping experience for customers and efficient fulfillment centers are set to benefit this year too.

To sum up, retailers are facing challenging economic conditions, which they have gotten used to during recent years. Strong spending trends in the last two months points favorably toward a healthy holiday season. As customers are more price conscious, discount chains will benefit clearly. Online sales can be expected to be more, as consumers engage in making smarter spending decisions through their smartphones and tablets. Higher foot traffic at some retailers can mean more sales at brick and mortar outlets as well.

Source: What To Expect From The Holiday Season Sales?