New Retail Report from Cushman & Wakefield

 
Cushman and Wakefield released its outlook for the 2015 holiday sales season today. In its report, Cushman & Wakefield Retail Research Director for the Americas Garrick Brown predicts that total USA retail sales growth in 2015 will match 2014 levels at 4.1%.
Cushman & Wakefield’s optimistic outlook for 2015 holiday retail sales growth is based on its analysis and estimations with regard to the following influential factors, statistics and trends:

§  This year’s holiday sales season will be longer than that experienced in 2014;
o   The calendar itself is longer; there are 28 days between Thanksgiving and Christmas Eve compared to only 26 days last year.
o   The holiday sales season itself is growing longer. The erosion of the importance of Black Friday is actually turning into an opportunity for retailers;

§  More retailers than ever will be open on Thanksgiving Day.

§  Consumer polling from the International Council of Shopping Centers (ICSC) indicates that 90% of American shoppers are already starting to plan their holiday purchases—that number is up from last year’s 82% and indicates that retailers will start to see increased sales numbers earlier this year.

§  ICSC consumer polling also indicates that the American consumer plans to spend more this year;  80% of survey participants planned to spend the same or more than they did last year. The average holiday shopping expenditure per consumer is expected to increase to $702 this season, up from $677 in 2014.

§  When compared to 2014, the American consumer is in a better place;
o   As of September 2015, the national unemployment rate was 5.1%, compared to 5.9% one year ago.
o   Since October of last year, the US economy has added 2.751 million non-farm jobs.
o   After being flat to negative for most of the past eight years, wage growth ramped up to the 2.0% range throughout the first half of 2015 and, after an early summer lull, has returned to those numbers. With virtually no inflation in place, these numbers are fairly substantial and well above anything recorded in the last decade.
o   While September job creation only totaled 142,000 jobs, the market has averaged 229,000 new jobs per month over the last year and these totals were likely driven down by concerns over stock market volatility over concerns regarding the Chinese economy that began in August.
o   Stock market volatility in the late summer months had little impact over actual job openings;  according to the latest Job Openings and Labor Turnover Report issues by the Bureau of Labor Statistics (BLS),  there are currently 5.4 million job openings in the USA. This metric hit its peak at 5.7 million job openings in July but this metric is still near its highest standing in the past decade
o   U.S. consumer debt is down;  according to the Federal Reserve, total U.S. household debt for Q2 2015 (the latest statistics available) stood at $11.85 trillion. This remains 6.5% below the $12.68 trillion peak of Q3 2008 and indicates that consumers still have a considerable untapped amount of buying power.
o   Energy savings to the US consumers since last year are now at an estimated $300 billion. The American consumer only increased their spending fractionally in 2014, opting instead to mostly use those savings to pay down debt and build savings. However, we expect the prolonged impact of this trend to translate into more spending in 2015.

§  There remains a disconnect between Wall Street and Main Street;
o   Despite the volatility of the stock market since August, consumer confidence has held its own. At the height of Wall Street instability in August, the Conference Board’s Consumer Confidence Index (CCI) actually increased from 91.0 (July 2015) to 101.3 (August 2015), and then climbed even further to 103.0 in September. Numbers released by the Conference Board on October 27^th indicate a slight drop in the CCI for October to 97.6. This is believed to be a delayed reaction to upheaval on Wall Street and would be consistent with the four to six week lag time we often see following turbulent economic events.
o   Now that Wall Street appears to be stabilizing, CCI gains should accelerate heading into the final months of 2015 as the holiday shopping season begins. Though the relationship between consumer confidence and actual consumer spending is a loose one, increased confidence historically translates into higher spending levels.

§  While retail same store comparables were relatively flat for both August and September 2015, it appeared that more than anything else, adverse weather conditions across the U.S. contributed to these weaker sales figures;
o   In many parts of the country, temperatures were at or near record levels during August and September.
o   Precipitation events also likely disrupted normal shopping patterns in many parts of the country in late Summer 2015.
o   Weather events may actually result in pent-up consumer demand that could boost shopping figures in the months ahead; particularly for apparel (fall and winter) and other seasonal goods that may have been impacted by unseasonable weather in certain markets.

§  There may be additional economic headwinds during the final months of 2015 and we can’t forecast for spoilers like unforeseen weather events or black swans, but all other economic indications should point towards sales increases during the 2015 holiday sales season that are on par with what the market recorded in 2014.