The National Retail Federation released its 2007 forecast Tuesday, predicting that retail industry sales (which exclude automobiles, gas stations and restaurants) will increase 4.8 percent from last year. According to its quarterly Retail Sales Outlook report, released at NRF's 96th Annual Convention & EXPO, NRF expects subdued first half economic growth to give way to accelerated sales in the second half.
Retail sales increased 6.3 percent in 2006. The first half of the year was much stronger than the second half due to the housing slowdown, high energy costs and tepid employment growth.
"This year, slow economic growth will be reflected in moderate consumer spending and retail sales gains," said NRF Chief Economist Rosalind Wells. "The quarterly industry sales pattern will be the opposite of last year with modest gains early in the year and better increases in the second half."
Sales at building material and garden equipment stores experienced lower growth last year, as did furniture stores. Other categories, including general merchandise stores, apparel specialty stores, health and personal care stores and food and beverage retailers maintained steady sales gains in the mid-single digit range.
According to the Outlook, industry sales gains of 3.8 percent in the first quarter should increase to 4.6 percent in the second, 5.2 percent in the third, and 5.7 percent in the final quarter.
Current retail trends will persist throughout the year. Luxury retailers will continue to outperform. Online shopping will continue to escalate. Retailers catering to the lower and mid-level income consumer will find achieving sales gains more challenging. Demand for merchandise related to the home will be impacted by a soft housing market.
Discussion Questions: How strong will retail sales growth be in 2007? What retail sectors will show the strongest growth?
I'm a little more optimistic about 2007, and think the growth rate will be closer to the 6.3 percent seen last year.
Like last year, the NRF show this week was well attended, had great speakers and had several networking opportunities. Congrats to all at NRF. The one area that seemed lacking was that there wasn't anything really new on the show floor.
There was something called "The STUDiO: Design for the Senses" that demonstrated how companies can drive sales, productivity, and profitability by appealing to customers' sense of sight, sound, smell, taste and touch. But this was off the beaten path. There was also X07, the store of the future display, but this seemed a repeat from last year.
The one booth on the show floor that really impressed me was a relatively low-tech solution to a personal challenge - gift wrapping. Met-Tech Corp of Meridian, MS was showing a contraption that automated parts, but not all, of the gift wrapping process, and claimed it is 10 times faster than manual wrapping. I wasn't as impressed about the speed as I was at how perfect the wrapped boxes looked, especially compared to the ones I wrapped during the holidays!