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Global Credit Research - 20 Nov 2012
New York, November 20, 2012 -- US retail sales growth will rebound from the third quarter this holiday
season, but will be down on the previous two years' robust
gains, Moody's Investors Service says in a new report,
"Holiday Sales Will Overcome the US Fiscal Policy Grinch."
Nevertheless, earnings growth will be slightly stronger.
"We expect holiday sales growth of about 4%, down from
6.5% in 2011," says Vice President -- Senior
Credit Officer Margaret Taylor. "But while sales will be
down, earnings are on track to grow at 3.5% to 4.5%
for the full year 2012, compared with 2.7% last year."
Consumers will spend for the holidays despite the so-called "fiscal
cliff," or combination of tax increases and spending cuts
that could come into effect in January, Taylor says. "Consumers
typically want to celebrate the holidays by shopping, and in the
past have shown their ability to ignore negative fiscal policy headlines
during the end-of-year shopping season."
Given these uncertainties they are likely to rein in their spending relative
to last year, however, and are likely to pull back further
in the first quarter of the new year.
Retailers whose goods are perceived to provide good value are expected
to perform well, as are the toys, electronics and party goods
segments. In electronics, the new Kindle and iPad,
Nintendo's Wii U and new game releases will drive sales this holiday
season, though heightened price competition may constrain margins.
Apparel retailers' earnings will continue to benefit from lower
commodity costs, particularly for cotton, as well as easy
comparisons with last year's weak sales.
Online spending will be a bright spot for retailers this holiday season.
"We expect online spending to increase about 15% year over
year, far outpacing the growth in overall holiday sales,"
Taylor says. "Consumers continue to be enticed by the ease
of online shopping, as well as the ability to find good deals online."
Fourth-quarter operating income accounts for more than 50%
of full-year operating income for nine Moody's-rated
US retailers. Among these, all except Macy's have speculative-grade
ratings. More broadly, holiday sales in the last two months
of the year represent about 20% of total annual retail sales,
and the fourth quarter represents about 30% of rated companies'
annual operating income.
Moody's research subscribers can access this report at http://www.moodys.com/research/US-Retail-Holiday-Sales-Will-Overcome-The-US-Fiscal-Policy--PBC_147492.
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VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
Kendra M. Smith
MD - Corporate Finance
Corporate Finance Group
Moody's: US retail sales growth slows this holiday season, but annual earnings up
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
No Related Data.
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