NRF forecast calls for a record holiday retail sales season

As the calendar quickly moves towards the holiday season, the outlook for this year could very well be unlike any other, due to things like high demand, supply chain and logistics issues, labor availability, consumer confidence, and inflation, among others.

But, amid these factors, one certainty is that nothing will get in the way of holiday shopping, especially this year. That was made clear this week by the National Retail Federation’s (NRF) 2021 holiday sales forecast, which was issued today.

NRF stated that a record year could be on tap for 2021 holiday retail sales (NRF defines holiday sales as sales from November 1-December 31, excluding automobile dealers, gasoline stations, and restaurants), projecting an increase between 8.5%-to-10.5%, coming in between $843.4 billion and $859 billion.

Should this estimate come to fruition, it would top the previous record of $777.3 billion in 2020, which marked an 8.2% annual gain, as well as nearly doubling an average increase of 4.4% over the past five years, too.

What’s more, NRF observed that online and other non-store sales—an area that has seen significant gains going back to the onset of the pandemic—are pegged to increase between 11%-to-15%, coming in between $218.3 billion and $226.2 billion, easily topping 2020’s $196.7 billion.

On a media conference call earlier today, NRF President and CEO Matt Shay explained that 2021 has been another historical year, for the retail industry, in terms of the transformation and changes brought about by the pandemic, as the sector continues to work through changing behaviors by consumers, and also changes brought about by the pandemic, external issues related to the supply chain, inflation, and others.

“Overall, 2021 has been a much better year than 2020 for many reasons,” said Shay. “There has been a lot more certainty in the way we handled the pandemic, and we have seen great progress on that front. Retailers have benefitted substantially from the incredible fiscal and monetary stimulus that has been provided by the federal government over the course of the last 20 months. That…has created an environment in which household fundamentals have been very strong. Consumers are in a favorable position as we head into the last two months of the year. We see income wages continue to rise, savings rates at an all-time high, and household balance sheets never stronger.”

Putting that into even clearer perspective, Shay noted that retail sales have grown annually each—going back to May 2020, when activity began to emerge from the initial lockdowns—with that momentum continuing. And over the first nine months of 2021, retail sales are up 14.5% compared to the same period in 2020. What’s more, he said 2020 retail sales were up by nearly 7%, for a roughly 20% gain on a two-year stacked basis, which Shay described as remarkable.

Despite the positive momentum and forecast, Shay did not hesitate to point out that issues, like supply chain disruptions and labor shortages—both of which are contributing to rising inflation—against the backdrop of the pandemic, response measures, vaccine rates, and other factors related to the health environment are viewed as headwinds to growth.

“We have a great deal of confidence that consumers will continue to power the economy in this last quarter of the year,” he said.

Retailers have been planning for this year’s holiday shopping season more robustly than ever, according to Shay, for things like seasonal inventory, staffing, product promotion, and pricing.

And he cited how United States-bound imports have grown substantially, with the Port Tracker report issued by NRF and maritime consultancy Hackett Associates calling for 26 million TEU entering the U.S. this year, a 20% annual increase, and an all-time high.

“This reflects that retailers have planned for this in advance, and despite the statements we have seen about supply chain challenges, we are prepared for the holiday season,” he said. “We do have and will have the available inventory in place and be prepared to meet consumer needs to meet that demand this year. Retailers have adapted their behavior for this environment and so have consumers. More than ever, consumers this year are embracing an earlier start to the holiday season, and, for our part, we are certainly encouraging consumers to shop early and shop safe to get the presents they need and want.”

NRF Chief Economist Jack Kleinhenz said on the call that in looking back at the third quarter there was what he called a bit of a slowdown in the economy, while consumer spending has held up relatively well.

“The third quarter was weighed down by Covid infections and hospitalizations, as well as supply bottlenecks,” he said. “Looking ahead, the economy is very sturdy…absent the amount of fiscal spending we have had over a large part of 2021. The outlook for personal income is good, and we have had good income fundamentals and income growth in August, driven by wages and compensation. I expect to see gains in the labor market over the last three months of the year, which should add income as well as spending.”

Conversely, though, he observed that inflation and price increases remain a concern and resulted in a mismatch between super-charged demand by consumers, as it is outstripping inventories and current production levels, which he said will take a while to catch up and continue to put pressure on prices.

“I think, at this point, consumers are able to absorb these prices, and the price increases are not necessarily as much an impediment to spending as they have been in the past,” he said. “The big question will be the fall-off in any spending, due to price hikes or lack or merchandise to purchase.”

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