Government Shutdown Could Derail Holiday Retail Sales

NEW YORK ( TheStreet) -- Retailers are "cautiously optimistic" about "solid" holiday sales this year, an industry trade group said Thursday, but ongoing fiscal concerns and the U.S. government shutdown could derail expectations.

Holiday retail sales this year are expected to rise marginally over 2012. According to the National Retail Federation, sales in the months of November and December will rise 3.9% to $602.1 billion, slightly ahead of 2012's actual holiday season sales growth of 3.5%. The forecast is higher than the 10-year average holiday sales growth of 3.3%, NRF said in a release Thursday.

"Our forecast is a realistic look at where we are right now in this economy -- balancing continued uncertainty in Washington and an economy that has been teetering on incremental growth for years," NRF President and CEO Matthew Shay said in a press release. "Overall, retailers are optimistic for the 2013 holiday season, hoping political debates over government spending and the debt ceiling do not erase any economic progress we've already made."

On the one hand, positive growth from the U.S. housing market as well as consumers' appetite to buy larger-ticket items gives "retailers reason to be cautiously optimistic for solid holiday season gains," the release said.

Another bright spot in the holiday sales forecast -- online sales continue to surpass expectations. Shop.org, the NRF's digital retail division, predicts online sales this season to rise to $82 billion, which is between 13% and 15% higher than 2012.

But if the back-to-school season is any measurement, retailers could be disappointed. Companies from Wal-Mart ( WMT) to Target ( TGT) have lowered guidance this year following soft summer sales and concerns about the consumer.

According to NRF, the holiday season can account for anywhere from 20% to 40% of a retailer's annual sales, and accounts for approximately 20% of total industry annual sales.

In addition, fiscal concerns around the debt ceiling and government funding, income growth and even policies and actions surrounding foreign affairs, could impact holiday sales, the NRF said.

On top of wary consumers, the length of the recent government shutdown could throw another wrench into the forecast.

"The economy continues to expand, albeit at an unspectacular pace," NRF's Chief Economist Jack Kleinhenz said. "In order for consumers to turn out this holiday season, we need to see steady improvements in income and job growth, as well as an agreement from Washington that puts the economic recovery first. Our forecast leaves room for improvement, while at the same time provides a very realistic look at the state of the American consumer and their confidence in our economy."

Retailers are expected to hire between 720,000 and 780,000 seasonal workers this holiday season, in line with the actual 720,500 they hired in 2012, which was 13% above 2011.

Last week, Deloitte forecast retail sales to rise 4% to 4.5% to a range of $963 billion to $967 billion from November through January. on par with last year's 4.5% gain. Retail sales between November 2012 and January 2013 (excluding autos and gasoline) totaled $925 billion, Deloitte said, citing the U.S. Commerce Department.

Deloitte also forecast double-digit increases in non-store sales of 12.5% to 13%, with mobile-influenced retail sales to rise 8% to $66 billion.

Consumers are "researching their purchases electronically -- via their PC, tablet or mobile phone -- are increasingly influencing in-store sales, particularly as we see greater integration across retailers' store, online and mobile channels," said Alison Paul, Deloitte's vice chairman and retail & distribution sector leader.

"More retailers are offering services such as 'buy online and pick up in store,' as well as inventory from other locations and price matching on the spot. The store is still a core element of holiday shopping and retailers leading the way this season will be those that effectively bring together their pricing, promotions, merchandise and inventory management across both their physical and digital storefronts," Paul said last week.

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

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