Photo: AP Photo/Elaine Thompson
Barclays Capital is increasing its sales projections heading into the holiday as mobile and e-commerce grow in importance for retailers.Analyst Robert Drbul now forecasts same-store sales increases of 2.5 to 3.0% for the 30 day period between Thanksgiving and Christmas day, up half a percentage point from projections made earlier this year.
Luxury and club retail are expected to post even larger growth of 6% or greater. Drbul has flagged both Tiffany’s and Ralph Lauren for comp expansion of 8%. Walmart will dictate much of the movement in total retail sales because of its sheer size. Last year the retailer posted $116 billion in revenue for the three month period including Christmas and Hanukkah.
Earlier this year, FedEx expected holiday growth at a healthy 12% clip, with its busiest day likely topping 17 million shipments. Part of that growth has been predicated on the aggressive launch of tablet and web applications, along with free or discounted shipping at Target, Saks, Kohl’s, and Walmart.
However, margin pressure seen over the past few months will remain difficult for many retailers to overcome. Higher commodity and labour costs have dampened fervent growth. Drbul expects margins to decline by 40 basis points to 25.1%, before decelerating further into 2012.
Inventory build remains a second factor this season, which could push overly promotional activity and impact average swing prices.
“In most instances, inventory growth has largely been outpacing expected sales growth in 3Q11, with our Broadlines/Department store coverage up 7.6% in 3Q11 versus expectations for 6.3% sales growth in 4Q11,” Drbul said. “We also take into consideration 3.0% square footage growth in 3Q11.”
The return to health has been consistent since apparel resellers announced a strong back-to-school season and stable October same-store sales. Sales were negatively impacted by warm seasonal weather in the beginning of the period, but Barclays believes a pick up towards the end of the month carried into November.