Trade Group Predicts Weaker Sales Through First Half

What with retailers still sifting through the receipts of a decidedly un-merry Christmas, the National Retail Federation is now predicting an un-happy new year, too.

In its quarterly Retail Sales Outlook report, the trade group says it expects the slow pace of retail in recent months to continue throughout the first half of the year, with retail sales gaining just 3.2%. And while it expects spending to pick up in the second half to 3.8%, it is still predicting an overall gain of just 3.5%, the lowest level since 2002.

"Consumers will be under financial stress from high energy costs, the fallout from the housing slump, and sluggish employment and income growth," the group predicts. "Shoppers will seek to pay down debt, spend more in line with income growth, and approach discretionary purchases with more restraint."

What's more, the group is predicting the lower growth will affect every segment. "Retailers will once again be forced to market to more practical consumers, many of whom will be looking to trade down. Even areas of past high growth like luxury goods and online shopping will feel the pressure. In 2008, the challenges will be formidable for everyone."



Meanwhile, add Sears to the long list of retailers singing the fourth-quarter blues. Sears Holdings, the Hoffman Estates, Ill.-based parent of both Sears and Kmart, says comparable store-sales for the nine-week period ended Jan. 5 fell 2.8% at domestic Sears units and 4.2% at Kmart.

"We experienced lower sales across most categories, with notable declines in the Sears apparel and tools categories and the Kmart seasonal categories," the company says.

"We believe that comparable store sales results reflect increased competition and the negative impact of unfavorable economic conditions, such as a weak housing market and consumer credit concerns." As a result, the company is lowering its earning forecast for the fourth quarter.

But there's no reason for total doom and gloom in the retail segment, either. Credit Suisse--even as it lowered its earnings estimates for both Home Depot and Lowe's--upped its recommendation of both big-box stores to "outperform."

"We expect the housing market to get worse in 2008," it says. "We expect that the problems we are seeing in mortgages will spread to credit cards and other forms of consumer credit. That will further weaken spending, which we expect.

"However, we also assume that this weakness decelerates later in 2008 and we are bottoming into 2009," it says. "We believe that the relative worst is behind the stocks."

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