Holiday Retail Forecast Too Low to Aid Weak Companies

By Douglas A. McIntyre Published Oct 3, 6:48AM EDT

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The National Retail Federation (NRF) reports that the industry should post a 3.9% increase in sales to $602.1 billion. On its face, the number looks good. However, if the forecast for November and December activity within the sector turns out to be correct, the weakest companies are unlikely to recover, perhaps at all.

The 3.9% improvement is misleading, because online sales, which make up an ever larger portion of overall activity, are forecast to grow by 13% to 15%, rising to as much as $97 billion. This part of the data indicates how much of a challenge e-commerce has become to the traditional store model. In particularly, it supports the belief that Amazon.com Inc. (NASDAQ: AMZN) will continue to grow at an impressive pace, at the cost of the aging physical store model. Additionally, weak retailers rarely have strong Internet sales, which puts them at another disadvantage within the industry.

The public corporations that are at severe risk are no different than those at risk at the start of the year — J.C. Penney Co. Inc. (NYSE: JCP) and Kmart and Sears, which are part of Sears Holdings Corp. (NYSE: SHLD). The only change is that a lackluster improvement in the industry means they will not be part of boats in a rising tide.

The situation for these retailers could become even more perilous, if the current shutdown of the federal government continues for a lengthy period. NRF Chief Economist Jack Kleinhenz remarked:

The economy continues to expand, albeit at an unspectacular pace. In order for consumers to turn out this holiday season, we need to see steady improvements in income and job growth, as well as an agreement from Washington that puts the economic recovery first. Our forecast leaves room for improvement, while at the same time provides a very realistic look at the state of the American consumer and their confidence in our economy.

The “Washington” part of the forecast becomes more troublesome every day, which means that retail sales across America actually could fall.

The retail industry is really no different from most others. Car sales improvements tend to help most companies in the sector. So do IT sales and media revenues. Public corporation retailers with sales that have fallen for several quarters will find that the pathetic activity within their sector will not help them — at all.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.