Year-in-Review: 2012 Sales and Consumer Confidence

With the holiday shopping season entering its final, frenetic stretch, retailers are now looking back at the year behind them. Overall, 2012 signaled something of a “return to normalcy” for the industry and indeed, growth was positive for much of it. Consumer confidence slowly began to inch upward and reached a four-year high in November as gas prices stabilized. The real estate market may finally be back on the upswing. Unemployment has dipped below the 8 percent mark, and consumers have grown more willing to open their wallets as the year has progressed.

Comparable store sales grew consistently this year, matching or beating analyst expectations in nine out eleven months thus far. In particular, we saw a strong back-to-school season and consumer confidence hit a seven-month high in September, helping holiday sales get off to an early and profitable start. E-commerce also grew by leaps and bounds this year: Thanksgiving weekend sales highlighted this sector’s burgeoning power in the retail space, with Black Friday sales alone exceeding $1 billion and Cyber Monday sales growing 30 percent this year.

Yet the momentum has started to slow as the year draws to a close, and there is reason to be cautious in our optimism. Despite reaching a high in November, consumer confidence slipped again in December, suggesting that it remains fragile heading into 2013.

Employment outlook remains top-of-mind for both consumers and retailers. Unemployment may be down, but job creation numbers have lurched along slowly, and many people have dropped out of the workforce altogether. Meanwhile, politics may threaten to further shake consumer confidence and slow the retail industry’s recovery. Following the November elections and with the ongoing debate surrounding the fiscal cliff,  concerns about potential tax hikes are worrying retailers (see our 2012 Retail Compass Survey of CFOs for more details), and the ultimate policy outcomes may hit consumers directly in the wallet. The industry’s steady roll was also slowed by Hurricane Sandy, which halted retail operations on much of the East Coast and hit November’s same-store sales hard. Even with the robust sales of Thanksgiving weekend, comparable store sales grew a mere 1.6 percent, missing analyst estimates of 3.3 percent.

The outlook for 2013 needn’t be doom and gloom, however. Even if we fall off the fiscal cliff, the true impact will not be felt immediately, and consumer confidence may be shaped more by press coverage than actual outcomes. Moreover, luxury retailers continue to do well. And while luxury shoppers are the most likely to be concerned about the fiscal cliff, their spending habits are the least likely to change significantly. In addition, the strong turnout for the Thanksgiving weekend helped offset the initial losses incurred by Hurricane Sandy, indicating that the blow to consumer spending was but a temporary hiccup. Overall, 2012 displayed incremental steps toward growth and recovery in the retail sector, and retailers have reason to feel cautiously optimistic heading into the new year.

What trends do you expect to see in the retail space in 2013?