SOURCE: Michigan Retailers Association

January 24, 2007 09:37 ET

Soft Holiday Sales Lead to Cautious Retail Forecasts

LANSING, MI -- (MARKET WIRE) -- January 24, 2007 -- Michigan retailers are restrained in their 1st Quarter sales projections, following a generally soft holiday season.

Although retailers' three-month outlook remains positive, their level of optimism is the lowest in four months, according to the Michigan Retail Index, a joint project of Michigan Retailers Association and the Federal Reserve Bank of Chicago.

Holiday sales were disappointing for the majority of retailers. They went into the season expecting, on average, a 4.5-percent gain, but 51 percent saw sales decline and another 10 percent reported sales unchanged from the previous year.

On a more positive note, nearly a quarter of the industry -- 23 percent -- rang up holiday sales greater than 5 percent, while another 16 percent recorded increases of 0-5 percent.

In addition, retailers posted better numbers for all of 2006. Forty-eight percent recorded gains for the year while 45 percent reported declines and 7 percent were unchanged. Nearly a quarter of the industry -- 23 percent -- racked up annual gains greater than 5 percent.

"The holiday season started strong but fell off in December," said MRA Chairman and CEO Larry Meyer. "Fortunately, more retailers posted better numbers for the entire year."

The Index showed 39 percent of retailers increased sales in December over the same month last year, while 47 percent recorded declines and 14 percent saw no change. The results create a seasonally adjusted performance index of 48, down from 50.4 in November.

In addition, 43 percent believe their sales will increase for January-March, while 30 percent forecast declines and 27 percent project no change. The results create a seasonally adjusted outlook index of 62.2, down from 62.4 in November.

The Michigan Retailers Association is the unified voice of retailing in Michigan and the nation's largest state trade association of general merchandise retailers.

Note: William Strauss, Senior Economist and Economic Advisor with the Federal Reserve Bank of Chicago, can be reached at 312.322.8151.

Michigan Retailers Association/Federal Reserve Bank of Chicago

Michigan Retail Index

December 2006 results

Index figures dating to July 1994 are available at www.retailers.com/news/retailindex.html

December Performance

Retailers reporting increased, decreased or unchanged sales, inventory, prices, promotions and hiring compared to the same month a year ago

(numbers in parentheses indicate November results)

            % Increased  % Decreased  % No Change  Index*       Responses
Sales       39 (41)      47 (43)      14 (16)      48.0 (50.4)  207 (207)
Inventory   30 (34)      36 (33)      34 (33)      58.6 (63.4)  199 (206)
Prices      41 (36)       8 (16)      51 (48)      64.7 (62.2)  200 (208)
Promotions  37 (31)      11 (12)      52 (57)      62.7 (58.8)  201 (208)
Hiring       9 ( 9)      16 (14)      75 (77)      47.4 (48.8)  195 (206)
Outlook for Next 3 Months

Retailers expecting increased, decreased or unchanged sales, inventory, prices, promotions and hiring compared to the same period a year ago

(numbers in parentheses indicate November results)

            % Increased  % Decreased  % No Change  Index*       Responses
Sales       43 (41)      30 (34)      27 (25)      62.2 (62.4)  204 (205)
Inventory   24 (16)      32 (47)      44 (37)      49.9 (42.0)  199 (204)
Prices      37 (39)       9 (11)      54 (50)      65.2 (64.7)  200 (204)
Promotions  39 (30)      13 (19)      48 (51)      67.6 (60.3)  201 (204)
Hiring       9 (10)      13 (21)      78 (69)      51.9 (47.4)  197 (204)
December Sales Performance & Outlook for Next 3 Months, by Region
(the first number indicates sales performance for the month; the number in
parentheses indicates outlook for the next three months)

            % Increased  % Decreased  % No Change
North       44 (31)      44 (36)      12 (33)
West        35 (50)      54 (19)      11 (31)
Central     17 (30)      53 (33)      30 (37)
East        46 (69)      39 (23)      15 ( 8)
Southeast   47 (43)      44 (37)       9 (20)
Question of the Month

For sales this past holiday season, what was the percentage increase or decrease from the previous season?

< -5%      -5...< 0%   0%          0 >...5%    > 5%
34.1%      16.5%       10.4%       15.9%       23.1%
For sales for all of 2006, what was the percentage increase or decrease from the previous year?
< -5%      -5...< 0%   0%          0 >...5%    > 5%
29.9%      15.2%       7.1%        24.4%       23.4%

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