Retailers Beware: Worst Is Yet to Come, but Hope on Horizon
Retailers that survived the 2008 holiday season shouldn't pin their hopes on the new year, as retail sales will remain weak throughout 2009 and won't rebound until 2010, TNS Retail Forward
forecasts.
For 2009, sales growth for the year (excluding automobiles and gasoline) is forecast to approach 2% compared with the 2.3% average growth for 2008 through November, based on data reported by the US Department of Commerce.
TNS Retail Forward anticipates a rebound to occur in 2010 and gain momentum through 2013, when annual increases in sales will again approach the 5% average growth rate of the past 10 years.
When adjusted for inflation, however, growth is forecast to remain below average in the forecast period.
"Although inflation-adjusted growth in core retail sales should rebound toward 4%, this will represent a decline from the 5% pace averaged during the 10 years prior to 2008," said Frank Badillo, senior economist for TNS Retail Forward. "The difference represents the demand-dampening effect of inflation."
Inflation is forecast to ease from its highs of early 2008, but price pressures are expected to resume and persist in categories such as fuel and food despite some letup in the short term.
The housing and financial crises will exact the deepest toll on the homegoods sector through 2009. However, in terms of average growth over the forecast period, softgoods retailers will register the slowest pace of growth among the four broad retail sectors: food, drug, and mass; homegoods; softgoods; and non-store.
TNS Retail Forward's Economic Forecast report series forecasts retail sales for key lines of trade and product categories:
Food Drug Mass (FDM) Channels
The FDM channels will be the least affected by the dramatic letup in retail sales growth during 2008 and 2009.
However, nominal sales growth for the combined FDM channels--convenience stores, discount department stores, drug stores, food service, small-format value retailers, supercenters, supermarkets, and warehouse clubs--is forecast to slow to a 4.6% average annual rate from 2008 to 2013, a decline of 0.7 percentage points from the prior five-year period.
"Among the FDM channels, supercenters and warehouse clubs are expected to generate the strongest sales growth, while discount department stores and supermarkets will be the weakest performers," Badillo said.
Homegoods Channels
Homegoods channels will undergo the strongest decline in sales in 2009. However, TNS Retail Forward forecasts that sales growth for the combined homegoods channels--appliance stores, book stores, building materials, hardware and garden supply stores, consumer electronics stores, furniture stores, home furnishings stores, office supply stores and sporting goods stores--will begin to rebound in 2010.
"Sporting goods and consumer electronics stores boast the best growth prospects through 2013," Badillo said.
Softgoods Channels
Softgoods retailers will register the slowest pace of growth among the four broad retail sectors.
"The only good news for the softgoods sector--i.e., apparel and accessory stores, shoe stores, and conventional and national department stores--is that 2008 is nearly over, ending the worst year of the five-year forecast period," Badillo said.
Although a decline in sales is forecast for 2009, the sector is expected to mount a strong recovery in 2010 before improving sales growth in each of the next three years.
"Although apparel and accessory retailers have the strongest growth prospects, their pace of sales growth will continue to lag that of supercenters, warehouse clubs, and e-commerce and non-store retailer sales, all of which compete for consumer spending on softgoods categories," Badillo said.
