Moody's: Pent-up demand will contribute to modest lift in holiday sales

NEW YORK — Moody's on Tuesday cut against the grain with its holiday forecasts by suggesting pent-up demand will help give retailers a reason to celebrate Black Friday despite concerns of another government shutdown in January. It's not what shoppers say they're going to not do this year, but rather an extension of how shoppers will actually spend based on last season's behavior. 

"We expect holiday sales growth to be in the 4.5%-to-5.5% range for the 2013 November-December shopping season, compared with 3.8% last year," stated Moody's assistant VP Michael Zuccaro. "Much of this improvement will be due to pent-up demand as lingering fiscal uncertainties ease and as consumers snap up pivotal new game systems like Playstation 4 and Xbox One."

In the year to date U.S. retailers' sales and earnings are on track with Moody's full-year forecasts, the firm stated. Sales growth has been tracking at the lower end of the 3%-5% range, while earnings growth is in the 3.5%-4.5% range. Moody's believes retailers for the most part have managed inventory levels conservatively and have focused on expense control.

Consumers will continue to prioritize gift-giving for this holiday season, Zuccaro said, noting that last year holiday sales rose modestly despite the fiscal cliff crisis and Hurricane Sandy. "While weak sales in October this year likely reflected concerns about the government shutdown, month-over-month growth in spending on electronics, furniture and sporting goods was strong, which may indicate that consumers have begun to release pent-up demand."

The best-performing segments will again be electronics, toys, party goods and luxury goods, Moody's says, while retailers whose goods are perceived to be good value for money should also do well.