Retailers should experience strong growth in 2004, despite the generally disappointing holiday season recently ended, according to Frank Badillo, senior economist at Retail Forward, Columbus, Ohio, a retail consulting firm.
During a conference call late last month to discuss holiday sales and the outlook for the new year, Badillo said, "As we enter 2004, it's time for retailers to be more confident, more opportunistic, because we expect a strong year.
Talking with SN after the call, Badillo noted that the rising economic tide should boost the supermarket industry as well. He observed that government figures show supermarkets grew sales 3.5% in 2003. He added, "I'm expecting they'll see about 3.5% to 4% in 2004. So this should be a decent year for supermarkets.
"Some of the growth will be generated by slightly stronger inflation in the channel. Prices have been ticking higher, and I think that's going to peak this year before falling off."
In the conference call, Badillo also noted that while some upscale retailers did better than expected during the holiday season, many mid-tier merchants and even some discounters had disappointing sales. He said the principal reason the middle-level merchants did so poorly was the job insecurity of their customers.
He also observed that many retailers expected the third quarter's 6% retail sales growth rate to continue or possibly improve in the fourth quarter. Instead, he said, it slowed to 4%.
"The tone at [the National Retail Federation annual conference in January] reflected a lot of the unevenness in holiday performance that we saw from the very strong third quarter," he said. "It's really hard to be confident entering the year when you're not seeing a steadily strengthening recovery."
However, Badillo noted that whether retailers had been elated or disappointed by the holiday season had a lot to do with the economic situation of their customers.
"I think it's quite notable that today, we have far fewer manufacturing jobs than we had a year ago at this time," he said, "and that's continued to cause some pain clearly at the down market, but even among middle-market consumers."
Meanwhile, Wall Street was giving other households a very prosperous holiday season. "We've seen a rebounding stock market, which has helped a lot of upmarket persons feel a lot wealthier," Badillo said. Other factors that gave at least some people more money to spend last year included the third quarter's tax rebates and the late spring surge in mortgage refinancing.