Thu, Nov 13, 2003 - Page 10 News List

Holiday spending to be best in years


The year-end sales season is shaping up to be the best in years for stores as the US economy comes out of hibernation and consumers turn back to traditional themes.

The National Retail Federation, the largest trade group, forecast that this year's Christmas and New Year sales will increase 5.7 percent, the largest rise since 1999, to US$217.4 billion.

Other analysts are showing similar optimism. America's Research Group projected 4.8 percent sales growth and Standard & Poor's sees an increase of about 5 percent.

"Retailers can expect a much better holiday season than last year," said Tracy Mullin, president and chief executive of the retail federation.

Stores are trying to erase the memory of a gloomy last year, when sales grew a paltry two percent -- the worst in a decade -- amid a weak economy and the threat of war looming in Iraq.

The holidays are crucial for US retailers, which reap as much as half their profits from the season and 25 to 40 percent of sales.

The trend this year is moving back to traditional themes after two years of patriotic tendencies in the wake of the Sept. 11 attacks on the US in 2001.

Luxury and menswear gifts appear to be strong this year, according the International Council of Shopping Centers.

"Gift-giving 2003 is leaning towards a retro-theme. This holiday season takes us back into the 80s," the organization said in its holiday outlook. "For example, many toys that were 'hot' two decades ago are reappearing in modified, sometimes original, forms."

One children's item making a comeback is the Cabbage Patch dolls, which were the rage in the 1980s.

Other gift items are include tweed clothing, jewelry, MP3 music players and books including a Benjamin Franklin biography and the best-selling novel The Da Vinci Code.

But retailers are being more cautious this year about inventory, to avoid being stuck with big stockpiles after the holiday, said Mullin.

"With retailers continuing to manage their inventory very well, the golden rule for consumers this holiday is `Buy it when you see it.' There's no guarantee that the red sweater you're eyeing will continue to be in stock as the holiday season nears."

The NRF said US consumers will spend an average of US$672 on the holiday this year, up from US$649 last year. That figure includes US$520 for gifts, 34 dollars for decoration, 26 dollars for greeting cards and the rest on miscellaneous items like flowers and candy.

Britt Breemer, chairman of ARG, said he sees "consumers spending more on each individual gift and consumers buying more gifts this year than last year." ARG projects the average gift will cost US$36.63, up from US$32.28 last year.

The economic climate is helping the holiday shopping mood, analysts say, but do not expect the eight percent growth of big years like 1994 or 1999.

The US economy grew at a blistering 7.2 percent pace in the third quarter, and the employment trends appear to be improving after a long slump.

"Some mixed economic signals could still negatively impact holiday sales, and the recent levels of discounting may not allow sales gains to drop to the bottom line," Standard & Poor's said in its outlook.

"A weak employment market is the primary near-term concern, which, along with the recent end of the home refinancing boom and uncertainty regarding sustained solid GDP growth into 2004, could still temper consumer spending levels this holiday season."

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