Moody's Turns Positive on U.S. Retail Industry
Moody’s Investor Services said Thursday that its outlook for the U.S. retail industry has turned positive for the first time since July 2015, with the strong economy giving 2018 a boost and acceleration expected in 2019. In the report, U.S. Retail: Going positive as investments start bearing fruit and economy boosts growth, Moody’s said retailers are finally starting to reap the benefits of investments aimed at cost efficiencies, enhancing their e-commerce capabilities and customers’ in-store experience. Moody's raised its operating income growth expectations to between 4 percent and 5 percent from 3.5 percent to 4.5 percent. Sales growth is now expected to be 4.5 percent to 5.5 percent, up from 3.5 percent to 4.5 percent. Moody’s also forecasts holiday sales growth to be 5 percent to 6 percent this year.
The report did point out some upcoming risks for the retail industry, such as a tighter labor market and increasing freight costs. In addition, the ongoing trade dispute between the U.S. and China would negatively affect U.S. retailers that import many of their products from China. The report also said that discounters and warehouse clubs, dollar stores, auto parts and online and off-price stores are all expected to perform well this year, and that online sales will grow to about 20 percent of total sales during the next five years. Amazon.com will continue to dominate in e-commerce, but brick-and-mortar companies will gain more of the online market share as they set up their own platforms.
Total Retail's Take: The turnaround for the retail industry is in full swing. Besides the Moody's news, the National Retail Federation (NRF) announced this week that it expects holiday retail sales in November and December — excluding automobiles, gasoline and restaurants — to increase between 4.3 and 4.8 percent over 2017 for a total of $717.45 billion to $720.89 billion. The forecast compares with an average annual increase of 3.9 percent over the past five years. Holiday sales in 2017 totaled $687.87 billion, a 5.3 percent increase over the year before and the largest increase since the 5.2 percent year-over-year gain seen in 2010 after the end of the Great Recession. As part of its forecast, NRF expects retailers to hire between 585,000 and 650,000 temporary workers this holiday season, up from last year’s 582,500. Happy holidays!
