Will modest growth this year be good enough for retailers?

0
Discussion
Feb 11, 2016
George Anderson

The National Retail Federation (NRF) expects retail industry sales (excluding autos, gas and restaurants) to grow 3.1 percent this year, higher than the annual average of 2.7 percent over the past decade. As in past years, NRF expects online sales to outpace brick and mortar, growing somewhere between six and nine percent in 2016.

NRF expects retail’s growth to outpace the economy as a whole. While employment growth will not be as robust as in 2015, the group expects the economy to add roughly 190,000 jobs a month, bringing the unemployment rate down to 4.6 percent by year’s end.

“Wage stagnation is easing, jobs are being created and consumer confidence remains steady, so despite the headwinds our economy faces from international developments — particularly in China — we think 2016 will be favorable for growth in the retail industry,” said Matthew Shay, president and chief executive of NRF, in a statement. “All of the experts agree that the consumer is in the driver’s seat and steering our economic recovery.”

“The economy had a bumpy ride in 2015 with fits and starts along the way,” said Jack Kleinhenz, NRF’s chief economist. “Despite the volatility, the economy continued to reduce unemployment, raise wages and actually increase real GDP by 2.4 percent. Lower gas prices are creating more discretionary income to save, pay down debt and spend on travel, eating out and personal services. Retailers have benefited as well, and continue to find ways to compete and succeed in a very cost-conscious environment.”

A RetailWire poll of attendees at the NRF’s Big Show in New York last month found that 77 percent were somewhat (65 percent) or much more (12 percent) optimistic about the retail industry’s prospects for 2016. Only 14 percent were somewhat or much less optimistic.

Photo: RetailWire

DISCUSSION QUESTIONS: Do you agree with NRF’s forecast of modest growth for the year ahead? Which economic factors do you think will play the biggest role in the retail industry’s performance in 2016?

Braintrust
"It’s an election year. I expect all parties will work to keep the economy stable. Setting expectations for modest growth makes sense in that context."
"The rest of the world is in a recession and the U.S. economy is not growing at a fast pace. All mean a not-so-great 2016 for retailers."

Join the Discussion!

13 Comments on "Will modest growth this year be good enough for retailers?"

Notify of

Sort by:   newest | oldest | most voted
Paula Rosenblum
BrainTrust

It’s an election year. I expect all parties will work to keep the economy stable. Setting expectations for modest growth makes sense in that context.

Max Goldberg
BrainTrust

I expect small-to-moderate growth. Unemployment may be down, but underemployment remains high. Wages have not kept pace with inflation, so consumers are still cautious about spending. The rest of the world is in a recession and the U.S. economy is not growing at a fast pace. All mean a not-so-great 2016 for retailers.

Brian Kelly
Guest
5 months 16 days ago

3.1 percent is a safe and realistic view.

Internally, with a lame duck POTUS, there will be very little change. Externally, uncertainty in the Middle East, especially over how Iran returns to the family of nations, will make energy costs potentially volatile.

The loss of unskilled manufacturing jobs and tech improvements to productivity will continue to be a sea-anchor on economic growth. The retail herd will continue to be culled in 2016.

As Alan Greenspan used to exuberantly say, “retail ain’t for sissies!”

Ralph Jacobson
BrainTrust

ANY growth is good growth these days. This is a consumer’s marketplace, globally, and competitive factors including innovation, services, location strategy and even cannibalization enter into the current marketplace.

Dan Raftery
BrainTrust
  1. Lower prices at the gas pump will certainly help a lot of people. But I don’t think they will be “paying down debt,” as much as they will be splurging a little on themselves.
  2. Price increases.

Question: does the NRF forecast incude e-commerce retail? If not, then I think it is overly optimistic.

David Livingston
Guest
5 months 16 days ago

To me 3.1 percent is nothing but inflation and population growth. So 3.1 percent is no real growth at all but just remaining even. Low gas prices seem to have hurt more than they have helped. A lot of retail is fuel sales so we need an asterisk after some of the sales figures. In 1976 I wonder if any of us would have predicted we would have a world wide glut of oil? We were told to drive 55 and conserve. Now 40 years later we are swimming in oil and commuting from our bedrooms to our laptops.

Roger Saunders
BrainTrust

Keep watching the consumer and their moods — consumer confidence, levels of happiness, concerns about jobs and unemployment, labor participation rate, impact of fluctuating gas prices, savings rates, payment methods like credit, debit, cash, payment of credit cards, in full, partial, minimum each month, number of people with health insurance, etc.

A close look at each segment of the population, e.g. millennials, Hispanics, aging boomers, employed, business owners — all offer clues as to how retail sales at different retailers will be impacted.

A significant number of people in various population segments are operating in stressful environments. The consumer will be the economic driver of retail sales, not Janet Yellen, Wall Street fluctuations, or how hot or cold it may get.

Karen McNeely
Guest

I think a 3.1% overall increase seems reasonable. The bigger question in my mind is who will be the winners and the losers? It seems like there are more options for the consumer than ever. While overall there will be an increase in sales, many retailers may see much smaller increases or even comp decreases.

Craig Sundstrom
Guest

If you look at their data — growth of 3.1-3.7% in six of the past seven years — they’re saying “this year will be like the last, and the one before that, and…”

My own guess is it will be a little worse.

But one thing is certain: whatever the overall growth rate is, some companies will be above that, and some will be below that; and we’ll be asked — repeatedly — what the former are “doing right” and the latter “doing wrong.”

Lee Peterson
BrainTrust

The biggest economic factor for retailers right now is Amazon absconding with all their business. Worrying about macro issues should be a distant second IMO.

Having said that, modest growth projections are always a good idea in times of uncertainty, and a presidential election year is definitely just that: uncertain. Especially this one. Seems no matter who the final two candidates are, half of us are going to be worried that the “other” candidate is going to screw the pooch. So, look out consumer confidence for this entire year.

Carlos Arambula
BrainTrust

I refer to the NYTimes article by David Brooks: “To hear Sanders or Trump, Cruz and Ben Carson campaign is to wallow in the pornography of pessimism, to conclude that this country is on the verge of complete collapse. That’s simply not true. We have problems, but they are less serious than those faced by just about any other nation on earth.”

If the populists from both parties win their party nomination, I fear consumer confidence will deter growth in 2016.

gordon arnold
Guest
5 months 15 days ago

Looking at 2015 F/Y market data as of this date, it might be a little difficult to see how things could get much worse. My experience and observation has taught me there is no bottom to the barrel on an individual basis as in company and specific markets. The economies of the world will define how and who will survive and thrive in accordance with the capabilities and likes of consumers. It may be a good idea to think the good old days started yesterday. This will encourage all to throw away the cookie cutter models and build flexible businesses to suit consumers needs wherever they may take us much like a Burger King selling hotdogs just to see if it works.

Bart Foreman
Guest
Bart Foreman
5 months 15 days ago

The usual safe bet. Way too many variables to be much more than an educated guess. 3.1% is really no net growth. And if the low forecast is off a little, it won’t be a big miss. Too many businesses are still stuck in a time warp we call doing business in the Age of Yesterday. Old systems still dominate and those that have invested heavily now have robust systems but they don’t know how to use them. We see lots of marketing issues not being properly addressed, and that will hinder growth.

wpDiscuz
Braintrust
"It’s an election year. I expect all parties will work to keep the economy stable. Setting expectations for modest growth makes sense in that context."
"The rest of the world is in a recession and the U.S. economy is not growing at a fast pace. All mean a not-so-great 2016 for retailers."

Take Our Instant Poll

Do you agree or disagree with NRF’s forecast of modest growth for the retail industry in 2016?

View Results

Loading ... Loading ...