Even though Halloween celebrations won’t begin until Saturday, retailers are already gearing up to welcome holiday shoppers. The National Retail Federation (NRF) said that it expects a 3.7% rise in sales during the holiday period. Several factors provide an optimistic outlook for retailers this time around. This includes favorable economic conditions and a push provided by online sales.
Retailers look poised to mop up gains from these encouraging trends. Thus, adding retail stocks to your portfolio may be a prudent decision at this time.
Encouraging Economic Conditions
Oil prices continue to trend lower, creating more disposable income for the consumer. On Monday, the price of WTI crude oil dropped to its lowest level since Aug 10. Oversupply concerns and weakening global demand continue to weigh on oil prices.
Additionally, the job market also continues to show gradual improvement. September job additions came in lower than expected and average hourly earnings declined by a cent. However, the unemployment rate has come down to 5.1%, a significantly lower number. Meanwhile consumer confidence of low-income groups is at an all-time high.
Online Sales to Rise
Estimates released on Monday by FedEx Corporation (FDX – Analyst Report) show that the company will possibly handle 317 million packages from the period starting from Black Friday and ending on Christmas. These represent record volumes and will be a 12.4% hike over the same time last year.
FedEx also said that it expects to see heightened activity around Cyber Monday, when online offers touch a yearly high as well as on the first two Mondays of December. The company expects to handle in excess of twice the packages it does on a normal day.
These estimates indicate that online shopping is expected to improve significantly. They are also in line with NRF predictions that online sales will see a 6% to 8% jump.
Major Trends
Total holiday spending is expected to increase by 3.7% to $630.5 billion. The trend of purchasing for oneself will increase according to the NRF survey of consumers conducted this month. Of those polled, 55.8% expect to purchase non-gift items, with the amount of the purchase increasing from $126.37 to $131.59.
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