After Weak First Half, Analysts Predict Strong End-of-Year for Retail

With back-to-school and the holiday season taking up the majority of Q3 and Q4, retailers are often upbeat about the outlook of the second half of nearly every fiscal year. Yet, with an unexpected onslaught of West Coast shipping issues, minimum wage changes and economic upheavals this year, retailers worldwide have had a difficult first half in 2015 — with many betting their revenue forecasts on the upcoming busier retail season.

Thankfully, expert analysis predicts the second half of 2015 will be favorable for commerce, much more so than the first six months. This is especially true for those retailers in the apparel, beauty and luxury industries.

With a higher minimum wage for many workers, consumers are likely to have extra cash on hand.
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With a favorable unemployment report coming out in the U.S., a higher minimum wage for many American workers and shipping issues having been resolved on its West Coast, consumers are likely to have extra cash on hand — particularly for those stores offering promotions. Therefore, companies must strike the right balance between too steep of markdowns — which can hurt profitability — and too low of markdowns — which won’t pull in enough customers to make the promotion worthwhile.

As the second half of the year approaches, this trend of promotions is likely to continue as more and more retailers compete for consumers in an omnichannel environment. Creative approaches to convenient shipping, quick delivery and well-timed promotions will be key this fall and winter for retailers looking to boost their bottom line with end-of-year sales.

As for how the consumers themselves are feeling, sentiment is optimistic, which bodes well for retailers, said Chris Christopher, economist at IHS Global Insight in an interview with WWD (behind paywall).

“Increasing levels of consumer sentiment assist spending on large ticket items and clothing. Our consumer spending outlook for the third and fourth quarters is relatively upbeat. This is good news for retailers as they approach the back-to-school shopping season and start planning for fourth-quarter holiday retail sales.

Quick shipping and timely promotions will be key for retailers looking to boost end-of-year sales.
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Higher spending is already trending, and has been since May in the U.S., where the personal saving rate — measured by the BLS as personal savings as a percentage of disposable personal income — was 5.1% in May, compared with 5.4% in April. May’s data supports prior reports that consumers are spending more money as income increases.

While apparel and beauty retailers anticipate their most crucial selling seasons, the appliance and automotive industries already saw the biggest uptick in revenue in Q2. This is good news for fashion and self-care companies who have been experiencing weaker sales in key markets, as well as the negative impact of a strong dollar — most affecting those stores with physical locations in popular international tourist cities. With big ticket items already purchased for many consumers, mindset will likely shift to apparel, beauty and luxury for the holiday season.

With the uptick of big-ticket purchases in Q2, holiday shoppers will shift to apparel and beauty.
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Indeed, after a weak first quarter in the U.S., analysts say a “strong 280,000 payroll job gain in May is confirmation the first-quarter slump was an anomaly. Consumer spending will remain the mainstay of the economy, and housing construction will also contribute to growth. The major drag on growth will come from net exports, because of a strong dollar.”

In all, for retailers looking to boost sales in the second half of the year, a focus on balancing promotions with profitability, as well as increasing inventory for fashion, beauty and luxury items will be key to growth. Consumers this fall and winter will spend — the challenge for all in the commerce industry is simply ensuring your brand is the one with which they purchase.