Wednesday, September 30, 2009

Retailers Are Having Trouble Predicting

Retailers and retail analysts are having more than their share of difficulty predicting sales this year, and those difficulties are continuing into the Halloween and Christmas seasons. Halloween sales may be down 15 percent from last year, in part because of flu fears that may keep people home from Halloween parties. Could those same flu fears keep people out of the stores during the Christmas season? If so, Christmas season sales could be down around 10 percent. But the more optimistic assessments, which don’t take flu into account, suggest the Christmas season could be about the same as last year.

One reason for lower sales is that so many stores have closed. Forecasters can only guess how shoppers will react to a Christmas season that has fewer stores than the year before — because it hasn’t happened before. Another problem is that the seasonal adjustments that allow forecasters to make a relatively smooth picture of all the seasons in a year aren’t working so well now. Consumers’ incomes and expectations have changed so much that the meaning of the seasons has changed, and seasons don’t relate to each other in the same way they have in the past.

With the government’s incentive program over, everyone knows auto sales for September and October will be less than we saw in August, but how much less? The fall-off seems likely to be somewhere between 25 and 50 percent, but that is an awfully wide range in an industry that historically has been able to forecast sales within about 3 percent. The pace of dealer closings is the highest I’ve ever seen, with some dealers using the Clunkers program as their final clearance sale, and others forced out as they could not get post-Clunkers financing to maintain their inventory. Fewer dealers would tend to point to lower sales, and so would the collapse in auto leasing. People who lease cars are prompted to turn them in after just 2 to 5 years. But when people buy a car, they may keep it for ten years or longer. So much is changing in the auto business that it’s hard to make accurate predictions. Tomorrow, when auto manufacturers report their sales for this month, we’ll get a better idea of where auto sales are going.