Retailers Forecast a Weak Holiday Season

With the unemployment rate close to 10% and home values still sharply depressed, the Oct. 6 forecast from the National Retail Federation that holiday shopping will decline 1% in 2009 compared with last year's dismal showing was no surprise.

The retail group said holiday season sales will fall to $437.6 billion, down 1% from a year ago. That's an improvement from last year's 3.4% drop in holiday spending and better than the 3% decline in retail sales forecast for all of 2009. On the other hand, over the past 10 years, holiday sales have averaged 3.39% annual growth.

"As the global economy continues to recover from the worst economic crisis most retailers have ever seen, Americans will focus primarily on practical gifts and shop on a budget this holiday season," the group's chief economist, Rosalind Wells, said in a news release.

For retailers, that portends another season of aggressive promotions to get customers into stores. Some holiday retail categories, such as apparel and electronics, may see price deflation because of aggressive sales, the group said.

Retailers are already gearing up for a difficult season. On Sept. 30, Wal-Mart (WMT), the nation's largest retailer, said it would be offering more than 100 toys at $10 during the holidays, expanding a marketing program it implemented last year. Retailers are also building their holiday themes around tradition and family in a bid to entice worried consumers.

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