Retail

2011 Holiday Season Weaker than Last Year (AAPL, AMZN, TIF, SKS, WMT, DG)

The 2011 holiday season is very likely going to be a tale of two classes. For the well-off — those with discretionary incomes above $250,000 — spending is expected to increaseby about 7%. For most of us, however, spending is going to be no better than flat.That’s the result from a recent surveyby the National Retail Federation (NRF), which concluded that per capita spending this holiday season will fall from an average of $718.98 to $704.18, a drop of about 2%. About 60% of shoppers intend to take advantage of sales and discounts on clothing, electronics, and other items, and expect to increase their buying of discounted goods by about 16% over last year.The new iPhone 4S from Apple Inc. (NASDAQ: AAPL) and the new Kindle Fire from Amazon.com (NASDAQ: AMZN) are just a couple of the items that could see robust sales this year. At the higher end, Tiffany & Co. (NYSE: TIF), Saks Inc. (NYSE: SKS), and other luxury retailers are expecting strong sales. Retailers like Wal-Mart Stores Inc. (NYSE: WMT) and Dollar General Corp. (NYSE: DG) could be facing a tougher time, not because they’ll see fewer people. The customers at the discount stores will be looking for even more value for their money than before. Promotions such as free gifts with a purchase, extended warranties, or great customer service are expected to be popular.

Even though the NRF is predicting lower per capita spending, the group is estimating that holiday sales will increase by 2.8% in November and December compared with last year. The NRF also said yesterday that cargo volume at the major US container ports is expected to jump by 2.6% in October over last year’s volume. Container traffic was down -7% in August, the last month for which final figures are known.

The NRF has discounted the falling volume as an aberration in 2010, when a projected shortage of shipping containers caused US buyers to ship holiday goods in July and August. Estimated September 2011 cargo volume grew by 2.7% year-over-year, October volume is expected to grow by 2.6%, November by 4%, and December by 2.7%. Total container volume for 2011 is expected to rise 1.8% year-over-year, very far below the 16% growth in 2010 over 2009.

On-line buying is expected to increase from 43.9% of consumers last year to 46.7%. On-line shoppers also expect to spend more than average — about 22% more. Smartphones and tablets are gaining ground as on-line shopping aids. Nearly 53% of smartphone owners will use their phones for shopping and buying, and 70% of tablet owners will do the same. The trend is particularly strong among college-age adults, where 72% say they will use smartphones and 86% say they’ll use their tablets.

These are impressive numbers, but perhaps more impressive is the fact that nearly 57% of survey respondents say they do not yet own a smartphone or a tablet. That suggests that the mobile devices could indeed be a hot item for holiday buying, whether as a gift or for personal use.

Retail spending growth this year will not equal last year’s large uptick. Partly that’s because 2009 was such a weak holiday selling season that 2010 had to clear a very low bar. But earlier this year, 2011 projections for holiday selling were 5% higher than 2010. The projection now is for 2.6%, and that is largely due to US consumers’ worries about the economy.

Paul Ausick

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