KANTAR PROJECTS INFLATION-DRIVEN SALES GAINS

COLUMBUS, Ohio — The holiday sales outlook for 2011 indicates that growth will be driven by inflation, according to Kantar Retail, based here. The firm is projecting sales growth of 2.8% for the fourth-quarter holiday period at all retail outlets excluding auto and fuel compared with growth of 5.6% in 2010. Unit-volume growth is projected to be flat or slightly down, Kantar said. If unit volume or inflation-adjusted

COLUMBUS, Ohio — The holiday sales outlook for 2011 indicates that growth will be driven by inflation, according to Kantar Retail, based here.

The firm is projecting sales growth of 2.8% for the fourth-quarter holiday period at all retail outlets — excluding auto and fuel — compared with growth of 5.6% in 2010.

Unit-volume growth is projected to be flat or slightly down, Kantar said.

“If unit volume or inflation-adjusted growth turns negative for retail sales, it would likely coincide with a recession in the overall economy,” said Frank Badillo, senior economist, Kantar Retail.

“While the outlook isn't negative for all retail sectors, it will be driven by the degree to which declining confidence affects spending decisions, particularly for businesses,” he added.

In the face of rising uncertainty, Kantar Retail said it expects firms will hold back on investment and hiring, which will aggravate job and income prospects of households, who in turn will hold back on spending.

“The probability is high that this will lead to another recession unless some positive shock — such as government stimulus — keeps the period of heightened uncertainty short and quickly starts to lift consumer and business confidence,” Badillo said.

He said he expects shoppers' spending intentions to “continue to weaken” in the months ahead, rather than “fall off suddenly and dramatically.”

Kantar's ShopperScape survey of more than 4,000 consumers showed that consumers' outlook for the holidays is more upbeat than it was in 2009 after the recession, as more shoppers indicated they plan to spend more this holiday season, and fewer indicated they plan to spend less. About 50% of those polled said they expect to spend the same amount in the 2011 holiday season as they did a year ago.

Sales growth for the food, drug and mass channels is forecast to taper off into the fourth quarter and early next year as a result of declining unit-volume demand and price inflation, Kantar projected.

Nominal growth at supermarkets will remain higher than a year ago at 3.5%, the firm projected, while growth at drug stores is forecast to slow by a full percentage point to 2% compared with last year.

Small-box retailers, such as dollar stores and other small-format value stores, are projected to see sales gains of 7%, driven by shoppers seeking bargains, while big-box mass-channel retailers will see slower growth of 2%.

Sales at home-goods and soft-goods retail channels are forecast to be flat, and inflation-adjusted growth is forecast to be negative in several channels, including apparel, home improvement and furniture/home furnishings stores.

Online retail sales are forecast to grow 13.5% as shoppers — particularly upper-income shoppers — continue to shift more of their purchasing online and elevated fuel prices encourage shoppers to minimize store trips.