Cautious consumers will likely hold back this Christmas season, but some firms will bright.
Cautious consumers will likely hold back this Christmas season, but some firms will bright.
Americans may be in better spirits than they were six months or a year ago, but almost no one believes they’re ready to splurge on gift-giving this winter. The National Retail Federation predicts sales from Thanksgiving to New Year’s will decline by 1% from last year. Market researcher NPD thinks they’ll grow by a meager .5%, to 1.5%. Citigroup analysts are in the middle but think there’s opportunity for investors anyway. Some firms are taking advantage of competitors’ suffering to grow their businesses while other brands are holding onto customers by sticking to quality merchandise and reasonable prices.
Citigroup analysts say sales will likely be flat or up 1% this year, an improvement from last year’s decline of 3.4% but hardly a strong reversal. Working to limit consumer spending are stubbornly high unemployment numbers, a sharp pullback in consumer credit and higher gasoline prices. Working in favor of retailers are overall economic improvement since earlier this year and improving household net worth, thanks to big gains in the stock market.
Among the apparel companies that Citi analysts think will do well in the long run are Nike ( NKE – news – people ), Phillips-Van Heusen ( PVH – news – people ) and Foot Locker ( FL – news – people ). As clothing and shoe manufacturers that also sell directly to consumers, Nike and Phillips should get more of a bump from this year’s sales growth than manufacturers that only sell wholesale. That’s because consumers are shopping for discounts and will probably flock to factory outlet stores, say the analysts. Nike is also working to expand its retail sales online and in Asia.
Other retailers who stand to benefit after Thanksgiving are clothing shops American Eagle Outfitters ( AEO – news – people ) and Limited Brands ( LTD – news – people ) and jewelry store Tiffany’s ( TIF – news – people ). After a disastrous holiday season last year in which sales fell 16% and margins shrank, American Eagle’s hip, inexpensive clothing should boost the chain substantially. Limited, which owns Victoria’s Secret and other shops, will probably see its margins grow as the firm cuts in half the time it takes to get merchandise into its stores and gets better at managing inventory. Both efforts will help the company focus on getting the latest trends in front of shoppers.
Electronics and household goods may also do well this season thanks to pent-up demand from consumers who put off big purchases in the last year, fearful of losing jobs or homes. Analysts like Bed, Bath & Beyond as the housewares chain scoops up customers from bankrupt rival Linens ‘N Things. Bed, Bath also has no debt, has cut management costs and has the right variety of inexpensive gifts.
Citi analysts think holiday sales will rise 3.8% at Best Buy ( BBY – news – people ). They like the nation’s biggest electronics chain because customers flock to its stores for the latest products and knowledgeable staff. It doesn’t hurt that, like Bed, Bath, the chain’s biggest rival (Circuit City ( CC – news – people )) is out of business.
Nike will provide you Christmas gifts in this cold winter let you forget the cold winter of big recession. No matter what happens, Nike will always on your side. Let you have a perfect Christmas Day.
