Here we discuss JC Penney (JCP), Nordstrom (JWN), Target (TGT) and Wal-Mart (WMT).
This morning the National Retail Federation (NRF), the world's largest retail trade association, released its
economic forecast for 2009. The NRF expects retail industry sales, which excludes autos, gas stations and restaurants, will decline 0.5% compared to 2008. Here are the specifics:
"'Most of the consumer behavior we saw in 2008 will continue well into this year,' said NRF Chief Economist Rosalind Wells. 'Shoppers will be seeking value and trading down to discount and off-price retailers in order to stretch their purchasing power.'
"The first half of the year will see a continuation of the weakness that was felt in most of 2008. First half sales are expected to decline 2.5 percent. There will be some improvement in the 3rd quarter with sales decreasing 1.1 percent. In the fourth quarter, sales are expected to improve 3.6 percent due to easy comparisons to last year as well as a strengthening economy."
Keep in mind that the NRF is an industry trade group, and is usually more optimistic than this retail analyst. For example, as late as December 12, 2008, the NRF stood by its forecast of a 2.2%
increase in 2008 holiday sales. At that point, many industry observers (including Zacks) were forecasting holiday sales to decline year-on-year.
With that being said, I agree with the NRF's view that consumers will continue to trade down and that first half sales will decrease by at least 2.5%. However, I think the NRF is too positive for the second half of the year because it is assuming that this is typical economic slowdown and the consumer will return to spending patterns of the last 20 years.
This is a mistake.
