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Consumer Credit Crunch Flattens Holiday Sales, TNS Retail Forward Forecasts

COLUMBUS, Sept.19, 2007-Holiday sales this year will grow at their weakest pace in five years, TNS Retail Forward forecasts. TNS Retail Forward expects fourth quarter growth will slow to 3.3% from 4.6% in 2006.

Included in the forecast are home improvement stores, catalogs, online sales and the key retail sectors-where many holiday gifts are traditionally purchased-known as GAFO (general merchandise stores such as conventional and discount department stores, supercenters, warehouse clubs, apparel stores, furniture, home furnishings, consumer electronics and other specialty stores).

"The credit crunch will lead to a consumer crunch by the holidays. This will extend the weakness in retail sales beyond home improvement stores to other retail channels," comments Frank Badillo, Senior Economist for TNS Retail Forward

Holiday Retail Sales Results* (Fourth Quarter Year-over-Year Growth)

*For GAFO, Home Improvement and Non-Store Retail Lines of Trade

"This top-line forecast may still underestimate the extent of the weakness," Badillo continues. "Our forecast numbers are even weaker when home improvement and catalog retailer sales and online sales are excluded. And, the risks are biased in favor of still weaker growth, particularly if the housing market deteriorates further," he comments.

One persisting trend that may be a bright spot during the 2007 holiday season is that spending by up-market households has been less affected by growing economic worries than spending by down-market households. "It's likely that the ongoing economic fallout will increasingly affect up-market households and retailers, but up-market spending should remain relatively more buoyant," states Badillo.

Anticipated key retail sector holiday sales performance:

• Mass retailers will remain the most resistant to the economic slowdown. Supercenters and warehouse clubs will continue to be among the best retail performers while discount department stores will be the laggards of the sector.
• The most significant ongoing slide will be among softgoods or apparel retailers. While they bounced back from a weak holiday last year to post relatively strong growth in the first quarter, that growth will evaporate by the first quarter of 2008. Conventional department stores will remain the laggard while upscale department stores will avoid the declines. Apparel and shoe stores also will see sales growth tumble during the holiday season.
• Homegoods channels will see growth slip this holiday season, with furniture and home furnishings stores creating the biggest drag on growth as the downturn in the housing market has a lagged impact on demand for other homegoods. Among all channels, home improvement faces the most significant risk of weaker-than-expected performance.
• Consumer electronics and appliance stores also will be hurt as a result of the comparison to last year's double-digit growth fed by a promotional frenzy for high-definition televisions. This year the price cutting will be even steeper across all consumer electronics, but the response in demand will be less exuberant.

Online sales will remain the best performing channel among all of retailing. TNS Retail Forward expects online retail sales to approach $42 billion in the fourth quarter of 2007 compared with $35 billion last holiday season, a year-over-year increase of 18.5%. Online sales as a share of total retail sales will reach a new high of 3.5% this holiday compared with 3.1% a year ago.

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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 known as the Retail Forward Intelligence System™, provides members with an authoritative perspective on the retail and consumer products industries.

About TNS
TNS is a global market insight and information group.  Our strategic goal is to be recognized as the global leader in delivering value-added information and insights that help our clients to make more effective decisions.

As industry thought leaders, our people deliver innovative thinking and excellent service to global organizations and local clients worldwide.  We work in partnership with our clients, meeting their needs for high-quality information, analysis and foresight across our network of over 70 countries.

We are the world's foremost provider of custom research and analysis, combining in-depth industry sector understanding with world-class expertise in the areas of new product development, segmentation and positioning research, brand and advertising research and stakeholder management.  We are a major supplier of consumer panel, media intelligence and internet, TV and radio audience measurement services.

TNS is the sixth sense of business.
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To learn more about TNS Retail Forward's 2007 holiday outlook, join Senior Economist, Frank Badillo for the company's Webinar, Holiday 2007: A Christmas Crunch, at 11:00 am EDT, Thursday, September 27, 2007. Register online at www.retailforward.com.