Soft holiday sales lead to cautious retail forecasts

For Immediate Release

January 24, 2007

LANSING — Michigan retailers are restrained in their 1st Quarter sales projections, following a generally soft holiday season.

Although retailers’ three-month outlook remains positive, their level of optimism is the lowest in four months, according to the Michigan Retail Index, a joint project of Michigan Retailers Association and the Federal Reserve Bank of Chicago.

Holiday sales were disappointing for the majority of retailers. They went into the season expecting, on average, a 4.5-percent gain, but 51 percent saw sales decline and another 10 percent reported sales unchanged from the previous year.

On a more positive note, nearly a quarter of the industry—23 percent—rang up holiday sales greater than 5 percent, while another 16 percent recorded increases of 0–5 percent.

In addition, retailers posted better numbers for all of 2006. Forty-eight percent recorded gains for the year while 45 percent reported declines and 7 percent were unchanged. Nearly a quarter of the industry—23 percent—racked up annual gains greater than 5 percent.

“The holiday season started strong but fell off in December,” said MRA Chairman and CEO Larry Meyer. “Fortunately, more retailers posted better numbers for the entire year.”

The Index showed 39 percent of retailers increased sales in December over the same month last year, while 47 percent recorded declines and 14 percent saw no change. The results create a seasonally adjusted performance index of 48, down from 50.4 in November.

In addition, 43 percent believe their sales will increase for January–March, while 30 percent forecast declines and 27 percent project no change. The results create a seasonally adjusted outlook index of 62.2, down from 62.4 in November.

The Michigan Retailers Association is the unified voice of retailing in Michigan and the nation’s largest state trade association of general merchandise retailers.

Note: William Strauss, Senior Economist and Economic Advisor with the Federal Reserve Bank of Chicago, can be reached at 312.322.8151.