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Holiday sales to rise
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November 5, 2001: 5:05 p.m. ET
Retailers see sales growth despite weak economy, war on terrorism.
By Staff Writer John Chartier
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NEW YORK (CNNmoney) - Americans are likely to spend more this holiday season than a year ago despite rising unemployment, sluggish economic activity and the Sept. 11 terrorist attacks, two retail industry trade groups said Monday.
Consumers will spend about 4.4 percent more than they did a year ago as they stick closer to home, freeing up cash from lower fuel and travel expenditures, according to projections in a survey by the International Mass Retail Association, an industry trade group.
A separate survey by the Consumer Federation of America said consumers are likely to spend at least as much as - if not more than - last year, despite the terrorist attacks.
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Retailers anticipate better-than-expected holiday sales (CNN/file) | |
Apparel, toys, books, music and consumer electronics are expected to be among the most popular gift items this year, along with home furnishings, sporting goods and power tools, according to the IMRA survey.
Consumers probably will purchase those gifts at discount department stores, the survey found, noting that 82 percent of consumers surveyed said they planned to shop at discounters.
About 16 percent said they planned to shop over the Internet, about the same as last year.
Though overall consumer spending is on the decline, retailers like Wal-Mart Stores Inc. (WMT: up $0.93 to $53.90, Research, Estimates) and Best Buy Inc. (BBY: up $1.17 to $59.11, Research, Estimates) anticipate outperforming the general retail sector this holiday season as consumers shift their spending away from department stores and specialty stores to discount chains.
"We expect the season to be a good holiday season - not great," said Doug McMillon, Wal-Mart's senior vice president and general merchandise manager."
Many also hope that consumers will dote on family and friends this year as they look to the holidays as an escape from the emotional aftermath of the terrorist attacks in which hijackers rammed passenger jets into the World Trade Center and Pentagon killing thousands.
"There is a lot of pent-up spending. People are ready to get back to the stores," Britt Wood, IMRA's vice president, research, technology and education, said at a news conference at New York's Empire State Building.
Retailers have been struggling all year with sagging sales as consumers digest daily reports of layoffs, fears of rising fuel costs from the war in Afghanistan and a generally sliding economy.
Many Wall Street analysts have been predicting a sluggish, but not nightmarish holiday season. A sharp drop in spending immediately following the Sept. 11 terrorist attacks did not last long as spending returned to pre-attack levels by the end of that week.
However, much of that was driven by heavy discounting and promotions designed to drive sales while taking a bite out of profits. Although the IMRA survey predicts a 4.4 percent increase in holiday spending this year, the promotional nature of those sales is likely to impact quarterly financial results.
And retailers are facing even more bottom line pressure after the holidays when spending is expected to drop further.
Michael Niemira, senior economist at Bank of Tokyo-Mitsubishi, who compiles a weekly snapshot of the nation's chain-store sales, said that Americans actually have more money to spend this holiday season thanks to tax rebate checks, lower gasoline prices and lower lending rates reflecting nine interest rate cuts by the Federal Reserve this year.
However, Niemira cautioned that spending was likely to fall off after the holidays, a time when people feel more obligated to spend. Rising unemployment, declining consumer confidence and weakening home sales could discourage spending after the traditional holiday season ends.
Meanwhile, Monday's IMRA survey showed people are shopping earlier and earlier, a trend that has continued over the last few years.
The survey showed most consumers have not yet planned their purchases yet. About 10 percent said they would wait until the last two weeks of November to start shopping.
About 56 percent said they planned to buy clothing as a gift despite the lackluster performance of the apparel industry over the last few years. About 22 percent said they planned to buy consumer electronics, 21 percent said they simply didn't know what they'd buy; and about 16 percent planned to buy books or music.
Though Wal-Mart expects strong demand for toys, McMillon said Wal-Mart has stocked up on lower-priced toys ranging from about $5 to $50 this year.
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Brad Anderson, president of No. 1 electronics retailer Best Buy, said consumers are trending toward lower prices, but that most of that has already been factored in, and that a dearth of compelling new technology would help drive sales of higher-priced digital products, helping to offset discounts.
Both Wal-Mart and Best Buy expect a sellout on new video game consoles, the X-box from Microsoft and Nintendo's GameCube, both of which carry higher prices. 
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