Encouraging indicators paint a positive outlook for the upcoming winter retail season

Encouraging indicators paint a positive outlook for the upcoming winter retail season

With just over a month to go until the 2016 presidential election, observers are as undecided on the likely impact on apparel and footwear sales as they are on the winning candidate. But they agree any effect is likely to be short-lived, with a post-election bounce-back most likely to follow. 

While some analysts and surveys are suggesting the extreme uncertainty surrounding the Clinton-Trump showdown has been a headwind to apparel spending, others believe the distraction is likely to be minimal.

More than anything, it seems, the election could shake up spending patterns as shoppers divert their attention to the campaign. 

"The debates alone will cause a disruption in spending, as people tune-in and shift their focus from some of their usual behaviour," notes Marshal Cohen, chief industry analyst for apparel and retail at The NPD Group.

Some of the resulting sales loss will be made up, but it will be difficult to recover valuable impulse purchases, he argues.

"The loss of impulse spending during a presidential election is significant for the US apparel industry since unplanned purchases account for 29% of annual dollar sales," according to The NPD Group's Consumer Tracking Service.

Stifel analyst Richard Jaffe adds that autumn fashion sales "will likely be partially held back due to consumer distraction from a hotly contested presidential race and the fact that retailers' advertising will be displaced by presidential campaign advertising."

And Shelley Kohan, vice president of retail consulting at RetailNext, anticipates shoppers' election-related angst will have the greatest impact in the weeks immediately leading into and following election day on 8 November.

"While I'm suggesting to clients that they anticipate uneven levels of both store traffic and sales, with a general downward trend, from the last week of October through mid-November, I am also anticipating overall sales for the month of November will be strong as compared to November 2015," she notes.

Indeed, there's no doubt consumers like certainty, and a post-election bounce-back effect could even see sales enjoying a high double-digit lift in November and December.

According to AlixPartners, which analysed year-on-year sales growth during the 2004 and 2012 presidential election years – 2008 was excluded due to the financial crisis – sales declined 22%, on average, in September and October. But they quickly made up lost ground, increasing an average of 16% in November and December as shoppers released pent-up demand and focused on the holidays.

Encouraging indicators

Observers also point to the fact there are many encouraging indicators that paint a positive outlook for the upcoming winter retail season.

Stifel's Jaffe cites a positive macro-economic backdrop including a tightening labour market (higher wages and low unemployment), an increase in median household income, and rising home values and stock prices, all of which support consumers' spending habits. On top of this, consumer confidence appears relatively strong.

He also says abundant new fashion trends are "resonating with the consumer, spurring her desire for new merchandise."

Economic indicators are good, agrees RetailNext's Kohan. "There are two extra shopping days between Thanksgiving and Christmas as compared to last year's holiday season, and any residual angst of the elections will be well over by Thanksgiving, still the beginning of holiday shopping season."

A recent Harris Poll survey commissioned by RetailNext predicts Americans are set to shop the same this holiday season, regardless of who takes the White House.

Among those who plan to buy gifts this holiday season, 23% will spend less on holiday shopping if Donald Trump is elected president, while 21% will spend less if Hillary Clinton is elected. And a majority of shoppers said the results would not affect their spending, with 70% sticking to their plans if Trump is elected and 68% saying the same thing regarding Clinton.

Holiday shopping plans

First forecasts expect low single-digit gains in US retail sales this holiday season.

AlixPartners predicts a rise of between 3.3% and 4% in November and December; and the International Council of Shopping Centers (ICSC) sees 3.3% year-over-year growth (compared to a 2.2% increase in 2015) in retail sales at physical stores, with holiday shoppers planning to spend an average of $683.90. 

Similarly, the National Retail Federation (NRF) has just said it expects sales in November and December to increase a solid 3.6% to $655.8bn – significantly higher than the 10-year average of 2.5% and above the seven-year average of 3.4% since recovery began in 2009.

Additionally, NRF is forecasting non-store sales to increase between 7% and 10% to as much as $117bn.

"All of the fundamentals are in a good place, giving strength to consumers and leading us to believe that this will be a very positive holiday season," says NRF president and CEO Matthew Shay.

"This year hasn't been perfect, starting with a long summer and unseasonably warm fall, but our forecast reflects the very realistic steady momentum of the economy and industry expectations."

NRF chief economist Jack Kleinhenz adds: "Consumers have seen steady job and income gains throughout the year, resulting in continued confidence and the greater use of credit, which bodes well for more spending throughout the holiday season.

"Increased geopolitical uncertainty, the presidential election outcome and unseasonably warm weather are the main issues at play with the greatest potential to shake consumer confidence and impact shopping patterns."

As always, it remains to be seen how Holiday 2016 plays out. But RetailNext's Kohan emphasises that wherever retail performance falls at the end of the year, the reasons will have very little to do with election day.