Retail sales expected to improve in 2014

AP News
Posted: Feb 06, 2014 4:39 PM

NEW YORK (AP) — The nation's largest retail trade group expects retail sales will increase at a slightly faster pace this year than last as continued improvements in jobs and housing should help shoppers feel more confident about spending.

The Washington-based National Retail Federation said that it expects retail sales will rise 4.1 percent to $3.24 trillion in 2014. That's higher than the preliminary 3.7 percent growth seen in 2013 and above the average growth rate of 3.6 percent over the previous 10 years.

The trade group's retail sales forecast for the year includes online sales but excludes business from autos, gas stations and restaurants. Online sales are expected to be up anywhere from 9 percent to 12 percent this year, the trade group said.

The group's cautiously optimistic outlook comes as stores are still reeling from a difficult holiday season where they had to discount heavily to get shoppers to spend. The slow economic recovery, a stubbornly high unemployment rate and fierce competition from online retailers like forced traditional retailers to discount heavily just to get people through the door.

That weakness continued through January as heavy winter storms raking the United States cut into store traffic and weighed on post-holiday sales. Chains including Wal-Mart Stores Inc., the world's largest retailer, reduced their profit outlooks. More evidence of a difficult January came on Wednesday and Thursday when many of the 10 retailers that still report monthly sales said a key sale metric declined last month. Cato Corp., a women's clothing chain, teen retailer Zumiez Inc. and accessories chain The Buckle Inc. were among the retailers that reported a drop in revenue at stores opened at least a year, considered a key indicator of a retailer's health.

But officials at the National Retail Federation told reporters on a conference call Thursday that they see less volatility this year than last year, when consumers were dealing with government shutdowns and digesting a 2 percentage point increase in the Social Security payroll tax implemented on Jan. 1, 2013. The group expects a modestly recovering labor market, averaging 185,000 jobs per month. That should help the unemployment rate decrease to 6.5 percent or lower by the end of 2014, from the current 6.7 percent.

The National Retail Federation also expects economic growth to be above its long-term historical average. Early estimates for growth in the economy as measured by gross domestic product could be anywhere from 2.6 percent to 3 percent, a pickup from the estimated 1.9 percent growth for 2013, and the fastest pace in three years, the group says. GDP measures the economy's total output of goods and services.

"Measured improvements in economic growth combined with positive expectations for continued consumer spending will put the retail industry in a relatively good place in 2014," said Matthew Shay, CEO and president of the retail trade group.

Analysts will be dissecting fourth-quarter reports coming later this month from major chains. But they don't expect good news. Ken Perkins, president of Retail Metrics LLC, expects that earnings industrywide for the crucial quarter will be down 4.5 percent from a year earlier, the worst performance since the second quarter of 2009, when earnings fell 6.7 percent. At the start of December 2013, Perkins had forecast growth in fourth-quarter profit of 2.5 percent, according to his tally of 120 retailers.