The most recent data point as a predictor of holiday sales, Halloween (the sixth-largest shopping period after the winter holidays, Mother's Day, Valentine's Day, Easter and Father's Day) should be informative. The National Retail Federation (NRF) Halloween Study suggests that Halloween sales were down: $4.75 billion vs. $5.77 billion in 2008. At the same time, an alternative perspective comes from the IBISWorld Data estimate that Halloween sales were up: to $6 billion from $5.77 billion last year.

The Census Bureau's Advance Monthly Sales for Retail Trade and Food Service for October indicated that overall retail sales were up 1.4% from the previous month of September, but down 1.7% versus October-year-ago. Also, individual retailer performance varied -- some winners, fewer losers. The tea leaves still appear cloudy.

Three other trends probably represent better augers of winter holiday sales in 2009:

Inventory A look at inventory (e.g., Archstone's 5th Annual Holiday Forecast of Holiday Retail Sales) found that in-bound cargo -- a proxy for retail inventory -- is at its lowest level in seven years, down 20% versus 2007. This is further supported by retailers' desire to avoid the frenzied markdowns of last year. According to the Illinois Merchants Association, it's estimated that retailer inventories are down about 15% this year. Reduced inventories not only reduce selection available to shoppers, but also limit the amount of sales growth possible (can't sell what is not on the shelf).

A recent news report from a Target store in Chicago (by CBS2's Mike Parker) suggests that shoppers are already experiencing the lack of inventory first hand. Mattel's Mindflex, Barbie Fashionista dolls, and Zhu-Zhu toy hamsters are all difficult to find even now. Although illustrated in only one store, the empty shelves point to some of the potential issues that can emerge. Industry experts are suggesting that there will be many shortages among the top 100 toys by early December.

Shopper Mood Inconspicuous consumption and holiday shopping appear to be holding sway as shoppers have not yet seen the end of the recession. The NRF's Holiday Sales Actions Survey predicted holiday sales to be down about 1%, while other predictions (Retail Forward, Nielsen and Deloitte) see holiday sales as flat. Either way, 2009 is likely to be the second-worst (after 2008) sales holiday in the last 42 years. Most shoppers appear to be extending their "pragmatic" shopping approach of inconspicuous consumption into the holidays, i.e., more comparison shopping, shopping online, shopping early, buying fewer items, etc.

Retailer Actions Retailers' actions are also shaping the 2009 holidays. In addition to inventory reduction, many retailers began featuring holiday shopping earlier. Walmart led the charge with discounts in books and toys, launching its $10 toy section, with more than 100 items, in September. Target followed suit with toy values in its Oct. 4 circular and also launched its new price-match policy. Blaine's Farm and Fleet launched its holiday toy sale in October; and on Oct. 21, Walmart began announcing its holiday price reductions each week. It's worth noting that Walmart has also put in place an entire strategy for dealing with and defusing Black Friday crowds, suggesting they are at least somewhat optimistic about sales. It seems retailers are optimistic about "time shifting" holiday shopping.

Winter Holiday Sales

These holiday tea leaves suggest a mixed outcome. Given shoppers' reticence, retailers' reduced inventory, and the attempts to spread holiday shopping out over an earlier and longer period, it is likely that winter holiday sales will be flat to down in 2009.

After thoroughly interrogating the tea leaves, we were left with these two questions: Will retailers be successful in trying to spread out holiday sales and limit end-of-year markdowns? Will shoppers carry their recessionary shopping strategies forward through the holidays and into 2010?