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Forecast: CE Holiday Sales To Grow 4%

Columbus, Ohio — CE specialty retailers will enjoy solid 4 percent sales growth this holiday season as consumers clamor for digital TVs in advance of February’s broadcast transition.

But weakness in other retail channels will make this holiday season the softest in 17 years, market research firm TNS Retail Forward predicted.

Total retail sales will grow only 1.5 percent during the fourth quarter, representing the smallest holiday increase since 1991, when merchants eked out a 1.2 percent gain, the group said.

Included in the forecast were key retail channels, including consumer electronics and other specialty stores, conventional and discount department stores, warehouse clubs, home-improvement stores, and catalogs and e-tailers.

“The holiday sales forecast represents a weakening from modest third-quarter growth as the boost from tax rebates runs out,” noted Frank Badillo, senior economist for TNS Retail Forward. “The benefit from a letup in gasoline prices will be overwhelmed by the impact of rising unemployment, tighter credit and other hardships on households.”

The trends in economic conditions “offer no sign of an impending recovery,” he added.

TNS Retail Forward projected the mass-merchant and direct-sale channels will enjoy combined above-average growth near 6 percent in the fourth quarter, while home-goods retailers will see sales decline 1 percent or more.

CE stores will be the exception within the home-goods category, with holiday sales growth forecast at 4.0 percent. Sustained buying to prepare for the conversion to digital TV signals could make CE specialty retailers even stronger holiday performers than expected, the group said.

Mass retailers will also see a pickup in performance this holiday season as a result of a shift among shoppers toward value formats and the impact of higher food prices. Supercenters and warehouse clubs will remain among the best retail performers while discount department stores will be the laggard of the channel, the group said.

Online sales across all sectors will continue to lead the pack, with 9 percent growth, which will nonetheless be down significantly from last year’s 19 percent gains. Indeed, 2008 will represent the first single-digit growth rate for online retailing during the holiday shopping season since 1999. TNS Retail Forward forecasted online sales to reach $42.5 billion in the fourth quarter, up $3.5 billion from the prior year.

“The letup in online shopping reflects the spreading impact of the economic downturn since the last holiday season, particularly among upper-income shoppers,” Badillo said. “These shoppers, who are more likely to shop online, have turned increasingly value-focused in recent months as they have felt worse off with regard to investments, home values and other economic measures.”