Retailers trim expectations for '15

Growth forecast cut to 3.5% after 6 months of slow sales

Sluggish retail sales over the first half of 2015 led the National Retail Federation to lower its sales forecast for the year.

Now the world's largest retail trade association is calling for 3.5 percent growth this year after initially forecasting a 4.1 percent increase in sales for 2015.

Sales grew 2.9 percent in the first six months of the year, according to the organization. In- and out-of-store sales, excluding automobiles, gas stations and restaurants, make up the forecast.

A combination of factors, including "lackluster" economic growth in the U.S., work stoppage in West Coast ports, "treacherous" weather and "a deflationary retail environment" contributed to the slow start, according to the National Retail Federation executives.

"We think we'll see a better second half of 2015. Real consumer demand has actually been stronger than what nominal retail sales have indicated, and deflationary pricing is helping keep receipts low for U.S. households," National Retail Federation chief economist Jack Kleinhenz said in a blog post on the organization's website. "Going forward, retail sales should register further strength, and resilient consumers should never be counted out."

Retailers have an opportunity to finish strong with the back-to-school and Christmas shopping seasons left in the year, traditionally two of the biggest time periods for sales each year. Back-to-school shopping is expected to reach $24.9 billion this year, according to the federation. Holiday shopping forecasts have not yet been released for 2015, but the total spent last year was $616.1 billion.

Major retailers have seen mixed results so far this year.

Wal-Mart Stores Inc. reported modest first-quarter growth with a 1.1 percent increase in same-store sales. Net sales of $70.2 billion were up 3.5 percent from the same quarter a year ago. Wal-Mart will announce its second-quarter results Aug. 18.

Typically U.S. sales make up about 60 percent of the retailer's $486 billion in annual revenue. Wal-Mart reported $114 billion in revenue across all business segments for the first quarter.

Target reported a sales increase of 2.8 percent to $17.1 billion for the first quarter. It will report second-quarter results on Aug. 19.

Both Amazon and Wal-Mart Stores Inc. recently held online sales events designed to drive traffic and e-commerce revenue. Wal-Mart didn't provide specific sales data, but noted that after discounting about 2,000 items online July 15 it saw a "triple-digit" increase in same-day pickup at its stores compared with the same day in 2014.

Amazon, which reported a $23.18 billion in overall sales for the second quarter, reported online order growth of 266 percent worldwide. Customers ordered 34.4 million items on July 15, according to Amazon.

Expectations for online and nonstore sales for the year have also been downgraded. Now the National Retail Federation is expecting growth between 6 percent and 8 percent over the final half of the year after initially projecting a sales increase between 7 percent and 10 percent.

That retail sales thus far have not matched early projections should come as little surprise, said Cathy Hotka of retail marketing firm Cathy Hotka & Associates in Washington, D.C. Forecasts issued in recent years have been "rosy" and the middle class continues to struggle financially, she said via e-mail.

As customers continue to become more value-conscious, discount retailers like Wal-Mart stand to gain ground, Hotka said. Wal-Mart has placed a renewed emphasis on its "Every Day Low Price" business model and, as it showed with its "atomic deals" online earlier this month, is willing to experiment with pricing online.

Business on 07/25/2015

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