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Government shutdown may cut into so-so holiday sales, trade group says

October 02, 2013|By Tiffany Hsu
  • The Macy's department store at South Coast Plaza in Costa Mesa is decorated for the Christmas season.
The Macy's department store at South Coast Plaza in Costa Mesa is decorated… (Christine Cotter / Los Angeles…)

Holiday sales this season will be resoundingly so-so, buoyed by promising economic signs while being stifled by the stalemate in Washington, according to the retail industry’s top trade group.

Sales in November and December, which include the shopping Super Bowls of Black Friday and Christmas, will tick up 3.9% to $602.1 billion in the U.S., according to the National Retail Federation’s forecast.

Last year, sales rose 3.5%. The average increase over the past decade is 3.3%. The holiday season accounts for as much of 40% of individual retailers’ annual revenue and about 20% of the total industry’s haul, according to the NRF.

“While neither robust nor pessimistic, this is a realistic forecast of the industry’s expectations,” NRF Chief Executive Matthew Shay said in a statement. “The potential for higher growth exists, but the potential for consumer spending cutbacks also exists if we don’t see policy leaders address the bigger problem -- job creation and long term economic recovery.”

Online sales growth is expected to be stronger. The NRF said it expects revenue in that area to jump between 13% and 15% in the final two months of the year, amounting to as much as $82 billion.

Last year, sales in the fourth quarter rose 15.5% from the same period in 2011, according to the government.

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The NRF anticipates seasonal employment at retailers to grow by between 720,000 and 780,000 workers. In 2012, merchants brought 720,500 holiday employees on board, a 13% boost from the year before. said this week that it will hire 70,000 full-time seasonal workers, a 40% upswing from last year. Wal-Mart said it will add 55,000 seasonal associates, while Toys R Us plans to hire 45,000 employees.

Target said its holiday hiring will slide 20% to 70,000 seasonal workers.

Vendors worried about holiday sales have some factors working in their favor. The housing market is on the upswing, and personal incomes in August rose the most since February. Also, consumers appear increasingly willing to spend on big-ticket items.

But the government shutdown could crimp holiday shopping plans for many public employees.

A new report from the Boston Consulting Group found that although 59% of poll respondents said they’re generally optimistic about the future, 46% said they still feel financially insecure. Uncertainty over the government shutdown could cause positive trends to reverse, according to the group.

“The timing couldn’t be worse, as we are just weeks away from the all-important holiday season, when retailers and other businesses benefit from increased spending,” said John A. Challenger, chief executive of consulting firm Challenger, Gray & Christmas Inc. “Depending on how long the shutdown lasts, government workers may have to slash holiday spending.”


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