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TNS Retail Forward
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Retailers Beware: The Worst Is Yet to Come TNS Retail Forward Forecasts Slow Growth Through 2009

COLUMBUS, December 18, 2008 – As retailers struggle to survive the 2008 holiday season, TNS Retail Forward forecasts retail sales will remain weak through 2009 and not experience a clear rebound until 2010.

For 2009, sales growth for the year (excluding automobiles and gasoline) is forecast to approach 2% growth compared with the 2.3% average growth for 2008 through November, based on data reported by the U.S. Department of Commerce.

TNS Retail Forward anticipates a rebound to occur in 2010 and gain momentum through 2013, when annual increases in sales will again approach the 5% average growth rate of the past 10 years.  Adjusting for inflation, however, growth is forecast to remain below average going forward. (Fig. 1)

“Although inflation-adjusted growth in core retail sales should rebound toward 4%, this will represent a decline from the 5% pace averaged during the 10 years prior to 2008,” comments Frank Badillo, Senior Economist for TNS Retail Forward.  “The difference represents the demand-dampening effect of inflation,” he adds. 

Inflation is forecast to ease from its highs of early 2008, but price pressures are expected to resume and persist in categories such as fuel and food despite some letup in the short term.

The housing and financial crises will exact the deepest toll on the homegoods sector through 2009.  However, in terms of average growth over the forecast period, softgoods retailers will register the slowest pace of growth among the four broad retail sectors—food, drug, mass; homegoods; softgoods and non-store. 

TNS Retail Forward’s Economic Forecast report series, published in the Retail Forward Intelligence System™ last month, forecasts retail sales for key lines of trade and product categories. 

• Food Drug Mass (FDM) Channels:  The FDM channels will be the least affected by the dramatic letup in retail sales growth during 2008 and 2009.  However, nominal sales growth for the combined FDM channels—convenience stores, discount department stores, drug stores, food service, small-format value retailers, supercenters, supermarkets and warehouse clubs—is forecast to slow to a 4.6% average annual rate from 2008 to 2013, a decline of 0.7 percentage points from the prior five-year period.  “Among the FDM channels, supercenters and warehouse clubs are expected to generate the strongest sales growth, while discount department stores and supermarkets will be the weakest performers,” states Badillo. 

• Homegoods Channels:  Homegoods channels will experience the strongest decline in sales in 2009.  However, TNS Retail Forward forecasts sales growth for the combined homegoods channels—appliance stores, book stores, building materials, hardware and garden supply stores, consumer electronics stores, furniture stores, home furnishings stores, office supply stores and sporting goods stores—will begin to rebound in 2010.  “Sporting goods and consumer electronics stores boast the best growth prospects through 2013,” Badillo comments. 

• Softgoods Channels:  Softgoods retailers will register the slowest pace of growth among the four broad retail sectors.  “The only good news for the softgoods sector—i.e., apparel and accessory stores, shoe stores, and conventional and national department stores—is that 2008 is nearly over, ending the worst year of the five-year forecast period,” Badillo remarks.  Although a decline in sales is forecast for 2009, the sector is expected to mount a strong recovery in 2010 before improving sales growth in each of the next three years.  “Although apparel and accessory retailers have the strongest growth prospects, their pace of sales growth will continue to lag that of supercenters, warehouse clubs, and e-commerce and non-store retailer sales, all of which compete for consumer spending on softgoods categories,” Badillo adds. 

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About TNS Retail Forward
TNS Retail Forward, Inc. (www.retailforward.com ») is a global management consulting and market research firm specializing in retail intelligence and strategies. The company's syndicated research and executive development program, the Retail Forward Intelligence System™, provides members with an authoritative perspective on the retail and consumer products industries.  The Economic Forecast report series is available to members of the Retail Forward Intelligence System™.  To learn more about the Retail Forward Intelligence System™ or this report series, contact Katherine Clarke at kclarke@retailforward.com ».

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