Retailers Will See This Through

A quick recap of the good, the bad, and the ugly about the economy:

• In September, retail sales (excluding autos) increased 0.5%, the second monthly increase in a row
• Unemployment is not expected to have a material drop for several quarters. (This is traceable in part, we believe, to the widespread need for people to find new jobs in new industries or locales.)
• Meanwhile, so far in 2009, 98 banks have collapsed, and expectations are that 2010 will see more of the same

And yet, we still anticipate that between Thanksgiving and December 31 this year, retailers can expect to recoup about half of last Holiday's loss. (That is, if 2008 Holiday sales were off 9%, expect 2009 Holiday to be up 4.5%.)

Why do we maintain such an upbeat view? Here are the main reasons:

1. Consumer confidence, like the stock market, continues to rise
2. Frugal fatigue will be pushed aside this Holiday season. "Enough already!" will be the motto, especially when it comes to buying for others. (We do expect that the popular "self gifting" of 2007 will be subdued, however.)

The enduring effect of retailers who are more "street smart"

The survivors in retailing will each, in their own way, be much more street smart, which will have an enduring effect on retailing going forward. The retailers of the next decade will continue to realize higher turns on inventory, specially discounted merchandise from vendors, extended terms with landlords, and much greater use of technology, especially utilizing their website.

Retailing is being re-invented right before our eyes!