Bleak retail forecast for holidays

MINNEAPOLIS — Hurt at the gas pump and at the grocery, consumers have been shaken by this week's tremors on Wall Street. The result could be a bah-humbug holiday-sales season.

Consulting firm Deloitte, among the most optimistic of industry-watchers, expects it to be the worst holiday season in more than 15 years, with paltry gains of 3 percent or less.

Many analysts expect worse, given high fuel and food costs and lower credit-card limits for many shoppers. On top of that, there are fewer shopping days than last year, making it unlikely that retailers could match last year's dismal increases.

For shoppers, though, the doom and gloom could mean big bargains.

Britt Beemer, chairman of America's Research Group, is expecting even more deeply discounted merchandise on the Friday after Thanksgiving, considered the official start of the holiday season, as stores try to jump-start sales.

"If a retailer loses out on that day, it's over," said Beemer, who is predicting that sales could drop up to 2 percent compared with last year.

Beemer said a sales season that is six days shorter than last year's is a contributing factor. But he said the main reasons are higher gasoline and food prices, which are adding hundreds of dollars a month to many families' expenses.

"We're hearing things like parents not giving gifts to each other so that they can still get presents for their kids," he said.

Banks also have tightened lending standards and lowered credit-card limits, reducing some shoppers' abilities to buy now and pay later. Target this year moved to reduce its exposure to bad debt by lowering credit limits and increasing late fees and interest rates.

Beemer said mass merchants and warehouse clubs should be the strongest performers this year. TNS Retail Forward, of Columbus, Ohio, said "nonstore retailers," including home-shopping television merchants and online and mail-order stores, could have above-average sales gains as consumers look for ways to cut back on shopping trips to save gas.

Department stores, specialty-apparel retailers and upscale merchants are expected to have flat or lower sales as economic woes spread to more higher-income consumers. A Merrill Lynch report this week forecast a 2 to 4 percent drop in comparable-store sales at department stores and specialty retailers.

Home-goods stores will continue to suffer because of the depressed housing market, TNS and Beemer said.

One exception appears to be consumer-electronics retailers, which could continue to benefit from buying to prepare for February's conversion to digital television. TNS forecast consumer-electronic holiday-sales growth at 4 percent.

Best Buy said this week that its same-store sales, up 4 percent in the first half of the year, should increase 1 to 2 percent in the second half of the year.

In a conference call with analysts, the company said it expects to benefit from the digital-TV transition as well as from lower prices for games.