Grim Outlook for Retail in 2009.

In the wake of the worst holiday in at least 40 years, Retail Forward forecasts a grim outlook with continued flat-to-negative growth across most retail channels through most of 2009. Retail Forward forecasts retail sales outside of the channels where food and other household consumables are sold will continue to decline through the first three quarters of the year.

On an annualized basis, this forecast translates into core retail sales less autos and gasoline that are expected to end up flat in 2009 compared with 1.8% growth in 2008. The only growth will be in the food, drug and mass channels, which are expected to grow at about half their rate of 2008. Assuming the right conditions emerge, the fourth quarter of 2009 should begin to show signs of improvement, helped by weak prior-year comparisons.

“The seeds of a turnaround might sprout before the end of 2009 but that depends on whether the environment proves favorable—the government’s next steps must prove effective, consumers must become more positive about the future, job losses must ebb and housing-related measures must stabilize,” comments Frank Badillo, Senior Economist with Retail Forward.

In an all-out effort to lure scarce shoppers, 2009 will be a very promotional environment, Retail Forward predicts. “Price-cutting pressures amid weak demand will continue to make this recession more difficult than prior recessions,” Badillo adds. There is some good news for the retailers who were able to keep a tight reign on inventories through the holidays: The price-cutting pressure will remain most severe for home improvement and other homegoods retailers, which have seen inventories continue to climb.

“What’s most important about this forecast is the pattern, not the absolute numbers,” Badillo states. “The declines may turn out to be more or less, but either way what should be expected is a pattern of weakness that finds a bottom in the first three quarters of the year. And then, if certain factors fall into place, the first signs that things are getting better should emerge by the end of 2009,” he concludes.

For more information at:
http://www.retailforward.com