Economist says holiday spending should grow by 6.5%

A leading economist is forecasting a holiday season full of cheer for retailers.

“There’s been an overwhelming rash of good news over the past couple of months,” said Carl Steidtmann, Deloitte Research chief economist, who is expecting a 6.5% to 7% gain in non-auto retail spending for the holidays. “The consumer is ready to spend aggressively.”

Steidtmann presented his holiday forecast at the Fashion Group International’s annual luncheon held at the New York Hilton. Approximately 400 persons, representing all segments of the fashion retail industry, attended the event.

Steidtmann cited a wealth of data that he says will contribute to “one of the better performances by consumer businesses in recent memory.” It includes a worldwide drop in tax rates and interest rates, a rising stock market, and lower oil prices.

“It’s really quite remarkable,” he said.

Lower tax rates, Steidtmann said, frees more money to be spent on more goods. Lower interest rates allows businesses and consumers to “re-liquefy their balance sheets” and has fueled a housing and mortgage-refinancing boom.

In addition, Steidtmann said he sees an extended recovery well into 2004. In particular, he says, the labor market is again showing significant growth and is the last factor in what will be a full recovery. In fact, citing U.S. Labor Department household statistics (which is different from the often cited Labor Department’s monthly payroll survey), he says the job recovery has already begun.

All facets of the retail sectors will gain ground, including the department store, which has been struggling the past couple years. “The department store has become the store of choice for younger consumers,” he said.

Robin Lewis, president of Robin Lewis, Inc., a strategic analyst and consultant for the retail industry and who served as panel moderator for the lunchtime event, disagreed somewhat with Steidtmann’s 6.5% forecast, arguing that falling prices for consumer goods and too much competition will create softer retail growth. Or as Lewis puts it, “There’s too much retail space with too many competitors selling too much stuff.”

The luncheon event, titled “Success Strategies in a Challenging Economy,” also included presentations by William Lauder, chief operating officer of Estee Lauder Companies, Terry Lundgren, president and CEO of Federated Department Stores, and Hal Upbin, chairman and CEO of Kellwood, St. Louis, which markets apparel and consumer soft goods.

Lundgren, whose company owns a number of branded department stores, including Bloomingdale’s and Macy’s said his company is working on leveraging the Macy’s brand with their other regional department store properties. For example, Bon Marche chain in the northwestern U.S. has been renamed Bon-Macy’s, and the Midwestern chain, Lazarus, has been renamed Lazarus-Macy’s. He added, the company is working on ways to create a better in-store shopping experience at all their stores and offering more exclusive product from name-brand manufacturers.

Lauder says Estee Lauder continues look at ways to sell products to a broader consumer base by continuing to sell aspiration, prestige, and entertainment. “How do you do it right?” he asks. “You do it by offering the total package.”

Upbin of Kellwood said that diversification was the key to his company’s growth during the past 20 years. The company’s aggressive growth strategy not only included creating brands, but buying brands. Among the acquisitions were Robert Scott Ltd. Inc., David Brooks Ltd. Inc., Gerber’s Childrenswear Inc., and Auburn Hosiery Mills. While the strategy worked, it was not without some missteps, Urbin said.

“My mantra is things always take longer and cost more than you planned,” he said.