Holiday Forecast Decent, but Not Dazzling

By Rob Bates -- JCK Online, 11/1/2006 2:00:00 AM

It looks like it will be a solid but unspectacular holiday for jewelers, retail analysts tell JCK.

The National Retail Federation predicts a “subdued” 5 percent overall sales gain this holiday, compared with last year’s 6.1 percent jump. Management consultant Retail Forward makes an almost identical prediction of 5.5 percent growth, compared with 7 percent last year.

“We think it’s going to be a reasonably good season but a bit slower than last year,” says Ira Kalish, director of consumer business for Deloitte Research.

Jewelry stores should register 5 percent growth, predicts Frank Badillo, chief economist for Retail Forward, adding they are in a unique situation. “Prices have been pumped up by the price of gold. They will also benefit from a weak prior-year comparison period,” he says.

Ellen Davis, spokeswoman for the National Retail Federation, notes luxury products have been strong the last few holidays and adds, “We are expecting consumers to look for unique gifts, and that is something you are more likely to find in a jewelry store.”

Other analyst predictions:

The last-minute trend in shopping is likely here to stay, especially this year, since Christmas falls on a Monday.
Online sales will keep expanding. Last year, the online sector showed more than 20 percent growth, and it’s possible it will achieve the same level this year. Badillo thinks online sales this year will surpass 3 percent of total retail sales for the first time.
Department stores should show improvement, but overall they are a mixed bag. Upscale department stores and discounters like Kohl’s should outperform the rest of the sector.

On the plus side for the holiday are falling gas prices, a steady employment situation, and a longer-than-usual five-week Thanksgiving to Christmas period. Possible negative factors include a weak housing market and rising interest rates.

“There are certain economic indicators that seem somewhat alarming,” Davis notes. “But for some reason consumers seem pretty confident this year.”

But the good feelings may not last, analysts say, particularly if the housing market continues its current weakness.

“The real time to be anxious about,” Badillo says, “is after New Year’s.”