Holiday Retail Sales Forecast to Rise Nicely, but There's a Caveat

According to the respected number-crunchers at Deloitte, the 2019 holiday shopping season should make retailers cheerful, with sales expected to rise 4.5% to 5% from last year, and much faster in the e-commerce segment. But as MarketFoolery host Chris Hill and Motley Fool Asset Management's Bill Barker note, 2018 set a low bar.

In this segment of the podcast, they discuss the outlook for the fourth quarter, and weigh in on a similar report published by consulting firm AlixPartners. Similar, that is, except for the fact that they hedged their mildly upbeat calculations with an ominous warning.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on Sept. 17, 2019.

Chris Hill: Holiday retail sales are projected to increase 4.5% to 5% this year. This is according to an annual survey by Deloitte looking at holiday retail spending somewhere in the neighborhood of $1.1 trillion. Although, as you like to say, the great thing in life is to have an easy act to follow. Holiday retail sales in 2019, a little bit of an easy act to follow, or easier act to follow, because retail sales last holiday season were a little bit lower due to a number of things, not the least of which was, you may recall, last December, the stock market went basically straight to zero. Not straight to zero, but it went down a lot.

Bill Barker: [laughs] About 20%, a little over 20%, depending on what average you're following from its high to the low, which was right before Christmas. That was pretty tough. The real economy is growing 2%, 2.5%; inflation, 1%, 1.5%. So, 4%. So, throw another percent, maybe, in terms of holiday cheer, on top of just real growth plus inflation. It's not really that much of an estimate. You don't need a lot of data sources beyond your head to come up with that one.

Hill: Wow! That's quite a shot you just took at Deloitte.

Barker: I mean, it's just not some huge mystery, I think.

Hill: I should add parenthetically, for those who are thinking about looking at the landscape of retail stocks you could buy, e-commerce sales expected to grow in the range of 14% to 18%. Maybe not a surprise that e-commerce sales, looking to run ahead of traditional bricks and mortar retail as well.

Deloitte came out with their annual survey. There was another forecast that came out today as well. Maybe timed specifically to come out with a Deloitte one. From global consulting firm called AlixPartners. Basically came out with, not an identical forecast, but very close. Slightly lower range. 4.4% to 5.3%. It's basically the same, although AlixPartners in their forecast warned of, and I'm quoting here, "unprecedented uncertainty this holiday season for retailers." What do you think they know at AlixPartners that nobody else does? You're throwing a word like "unprecedented" around? Really?

Barker: There were four Christmases that came to mind as possibly being even more uncertain. 1941 comes to mind. And then, of course, the year Rudolph came into Christmas. Very uncertain going in there.

Hill: Yeah, there were headlines warning that Christmas might be cancelled outright.

Barker: Exactly. The year the Grinch actually did steal Christmas, there was a lot of uncertainty. "How's this going to play out?" Happy ending, as it turned out, despite the theft. And, of course, the year without Santa Claus.

Hill: Right. By the way, all those things you just mentioned, they all happened. So, there are the precedents right there. I don't know what the folks at AlixPartners are imagining is going to happen this holiday season.

Barker: Lack of research, I say. The precedent is there. Each one of those four Christmases, way crazier. It's just a little trade war. There's some tariffs. Maybe you're going to have to pay 15% more for your plastic toy, vs. a literal Grinch --

Hill: Breaking into your home.

Barker: What even is a Grinch? People had no idea. This year, you're like, eh, 15% more for a toy. And no one's stealing it overnight. Probably.

Hill: I think we need AlixPartners to step up, give us some potential bullet points here. What does this look like? Game out a couple of scenarios for me. What kind of unprecedented uncertainty are you talking about? Otherwise, you're just throwing words around.

Barker: Yeah. We'll revisit this. Those that have been around know that Rudolph, at least, is evaluated every year in this space.

Hill: Always.